As filed with the Securities and Exchange Commission on August 9, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
HUDSON UNITED BANCORP
---------------------
(Exact name of registrant as specified in its charter)
New Jersey
----------
(State or other Jurisdiction of Incorporation or Organization)
6711 22-2405746
---- ----------
(Primary Standard Industrial (I.R.S. Employer Identification No.)
Classification Code Number)
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
Hudson United Bancorp
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. J. BAUR WHITTLESEY, ESQ.
Pitney, Hardin, Kipp & Szuch Ledgewood Law Firm, P.C.
P.O. Box 1945 1521 Locust Street, Suite 800
Morristown, New Jersey 07962-1945 Philadelphia, Pennsylvania 19103
(973) 966-8125 (215) 731-9450
<PAGE>
Approximate date of commencement of proposed sale to the public: At the
Effective Date of the Merger, as defined in the Agreement and Plan of Merger
dated June 28, 1999 (the "Merger Agreement"), among the Registrant, Hudson
United Bank, Jeffbanks, Inc., Jefferson Bank and Jefferson Bank of New Jersey
attached as Appendix A to the Proxy Statement/Prospectus.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. |_| __________
If this form is a post-effective amendment filed pursuant to
Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. |_| __________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
================================ =============== ========================= =========================== ====================
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price per aggregate offering price** registration fee***
unit**
<S> <C> <C> <C> <C>
Common Stock, no par value 11,392,722 $30.72 $350,026,395 $97,308
Shares*
================================ =============== ========================= =========================== ====================
</TABLE>
* The number of shares of Jeffbanks Common Stock issuable in the Merger in
exchange for shares of Hudson United Common Stock at an exchange ratio of 0.95,
as set forth in the Merger Agreement, and assuming that all currently
outstanding options to acquire shares of Jeffbanks Common Stock are exercised
prior to the Effective Time of the Merger.
** 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 $29.1875 of the high $29.5625 and low $28.8125 prices reported by
the Nasdaq for JeffBanks common stock as of August 3, 1999, a date within five
business days prior to the filing of this Registration Statement, divided by the
0.95 exchange ratio.
*** $72,104 was previously paid in connection with the filing of the
Preliminary Proxy Materials in connection with the Merger on July 29, 1999.
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>
[JEFFBANKS LOGO] [HUDSON UNITED LOGO]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of JeffBanks, Inc. and Hudson United Bancorp
have approved the merger of JeffBanks into Hudson United.
In the merger, JeffBanks shareholders will receive 0.95 shares of
Hudson United common stock for each share of JeffBanks common stock. Hudson
United common stock is listed on the New York Stock Exchange under the symbol
"HU". Based on August __, 1999 closing prices, 0.95 shares of Hudson United
common stock had a value of $__.__. Hudson United will pay cash to JeffBanks
shareholders instead of fractional shares. The 0.95 exchange ratio is subject to
adjustments described in this joint proxy statement-prospectus.
JeffBanks shareholders will not be taxed on the exchange of JeffBanks
stock for Hudson United stock.
When the merger is completed, holders of JeffBanks stock will own about
9.9 million shares, or 25 % of Hudson United common stock, assuming that none of
the JeffBanks options are exercised prior to the merger.
The merger cannot be completed unless the shareholders of both
companies approve it. We have each scheduled special meetings so our respective
shareholders can vote on the merger. Each Company's Board of Directors
unanimously recommends that its shareholders vote FOR the merger.
The dates, times and places of the meetings are as follows:
The JeffBanks Meeting
Friday October 1, 1999
9:30 a.m.
The Rittenhouse Hotel
210 West Rittenhouse Square
Philadelphia, PA 19103
The Hudson United Meeting
Thursday, September 30, 1999
2:30 p.m.
The Sheraton Crossroads
Crossroad Corporate Center
Route 17 North
Mahwah, NJ 07495
JeffBanks shareholders of record as of August 10, 1999 are entitled to
attend and vote at the JeffBanks meeting. Hudson United shareholders of record
as of August 13, 1999 are entitled to attend and vote at the Hudson United
meeting.
Your vote is very important. Whether or not you plan to attend a
meeting, please take the time to vote by completing and mailing the enclosed
proxy card to us. If you sign, date and mail your proxy card without indicating
how you want to vote your proxy will be counted as a vote in favor of the
merger.
Betsy Z. Cohen Kenneth T. Neilson
Chairman and Chief Executive Officer Chairman, President and CEO
Jeff Banks, Inc. Hudson United Bancorp
<PAGE>
Neither the Securities and Exchange Commission, nor any bank regulatory agency,
nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
This joint proxy statement-prospectus is dated August __, 1999, and is
first being mailed to shareholders of Hudson United and JeffBanks on August __,
1999.
<PAGE>
JeffBanks, Inc.
1845 Walnut Street
Philadelphia, Pennsylvania 19103
Notice of Special Meeting of Shareholders
to be held October 1, 1999
To the Shareholders of JeffBanks, Inc.:
Notice is hereby given that a special meeting of shareholders of
JeffBanks, Inc. will be held at The Rittenhouse Hotel, 210 Rittenhouse Square,
Philadelphia, Pennsylvania 19103 at 9:30 a.m. on October 1, 1999, for the
following purposes:
(1) To consider and vote upon an Agreement and Plan of
Merger dated as of June 28, 1999, among Hudson United
Bancorp, Hudson United Bank, JeffBanks, Inc.,
Jefferson Bank and Jefferson Bank of New Jersey,
pursuant to which JeffBanks, Inc. will merge into
Hudson United Bancorp.
(2) To transact other business that may properly come
before the special meeting or any adjournment or
postponement of the special meeting.
Only shareholders of record at the close of business on August 10, 1999
are entitled to receive notice of and to vote at the special meeting or any
adjournments or postponements of the special meeting.
The JeffBanks Board of Directors unanimously recommends that
shareholders vote "FOR" approval of the merger.
By Order of the Board of Directors,
Betsy Z. Cohen
Chairman and Chief Executive Officer
<PAGE>
Hudson United Bancorp
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Notice of Special Meeting of Shareholders
to be held September 30, 1999
To the Shareholders of Hudson United Bancorp:
Notice is hereby given that a special meeting of shareholders of Hudson
United Bancorp will be held at The Sheraton Crossroads, Route 17 North, Mahwah,
New Jersey 07495 at 2:30 p.m. on September 30, 1999, for the following purposes:
(1) To consider and vote upon an Agreement and Plan of
Merger dated as of June 28, 1999, among Hudson United
Bancorp, Hudson United Bank, JeffBanks, Inc.,
Jefferson Bank and Jefferson Bank of New Jersey,
pursuant to which JeffBanks, Inc. will merge into
Hudson United Bancorp.
(2) To transact other business that may properly come
before the special meeting or any adjournment or
postponement of the special meeting.
Only shareholders of record at 3:00 p.m. on August 13, 1999 are
entitled to receive notice of and to vote at the special meeting or any
adjournments or postponements of the special meeting.
The Hudson United Bancorp Board of Directors unanimously recommends
that shareholders vote "FOR" approval of the merger.
By Order of the Board of Directors,
Kenneth T. Neilson
Chairman, President and Chief Executive Officer
<PAGE>
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS
ABOUT THE MERGER 1
SUMMARY 2
What this Document is About 2
Voting on the Merger 2
The Merger 2
The Companies 8
SUMMARY FINANCIAL DATA OF
HUDSON UNITED 9
SUMMARY FINANCIAL DATA OF
JEFFBANKS 12
COMPARATIVE PER SHARE DATA 15
SUMMARY PRO FORMA FINANCIAL
INFORMATION 18
INTRODUCTION 19
FORWARD LOOKING STATEMENTS 19
CERTAIN INFORMATION ABOUT
HUDSON UNITED 20
General 20
Recent Developments 21
CERTAIN INFORMATION ABOUT
JEFFBANKS 24
General 24
Recent Developments 25
THE JEFFBANKS MEETING 26
Date, Time and Place 26
Purpose 26
Board Recommendation 26
Record Date; Required Vote 26
Voting Rights; Proxies 27
Solicitation of Proxies 27
Quorum 27
THE HUDSON UNITED MEETING 28
Date, Time and Place 28
Purpose 28
Board Recommendation 28
Record Date; Required Vote 28
Voting Rights; Proxies 29
Solicitation of Proxies 29
Quorum 30
THE PROPOSED MERGER 30
General Description 30
Consideration; Exchange Ratio;
Cash instead of Fractional Shares 30
<PAGE>
Page
Conversion of JeffBanks Options 31
Background of and Reasons for the Merger 31
Interests of Certain Persons in the Merger 33
Opinion of Goldman, Sachs & Co. 35
Opinion of Keefe, Bruyette & Woods 42
Resale Considerations Regarding
Hudson United Common Stock 47
Conditions to the Merger 48
Conduct of Business Pending the Merger 48
Stock Option to Hudson United for
JeffBanks Shares 49
Employee Matters 49
Representations, Warranties and
Covenants 50
Regulatory Approvals 50
Management and Operations
After the Merger 51
Exchange of Certificates 51
Amendments 52
Terminating the Merger Agreement 52
Special Termination Provisions 53
Accounting Treatment of the Merger 54
Federal Income Tax Consequences 55
No Dissenters' Rights 56
PRO FORMA FINANCIAL INFORMATION 57
DESCRIPTION OF HUDSON UNITED
CAPITAL STOCK 64
Common Stock 64
COMPARISON OF THE RIGHTS OF SHARE-
HOLDERS OF HUDSON UNITED AND
JEFFBANKS 65
Special Voting Requirements 66
Cumulative Voting 69
Classified Board of Directors 69
Removal of Directors 69
Nomination of Directors and
Other Matters to be placed
on Annual Meeting Agenda 70
Special Meeting of Shareholders 70
Rights of Dissenting Shareholders 70
Shareholder Consent to Corporate Action 71
Dividends 71
By-laws 71
Limitations of Liability of Directors
and Officers 71
Consideration of Acquisition Proposals 72
Preferred Stock 73
INFORMATION INCORPORATED BY
REFERENCE 74
OTHER MATTERS 75
LEGAL OPINION 75
EXPERTS 75
APPENDIX A-Merger Agreement A-1
APPENDIX B-Stock Option Agreement B-1
APPENDIX C-Goldman Sachs Fairness Opinion C-1
APPENDIX D-Keefe, Bruyette Fairness Opinion D-1
<PAGE>
HOW TO GET COPIES OF RELATED DOCUMENTS
This document incorporates important business and financial information
about Hudson United and JeffBanks that is not included in or delivered with this
document. Hudson United and JeffBanks shareholders may receive the information
free of charge by writing or calling the persons listed below. For Hudson United
documents, make your request to D. Lynn Van Borkulo-Nuzzo, Corporate Secretary,
Hudson United Bancorp, 1000 MacArthur Boulevard, Mahwah, NJ 07430; telephone
(201) 236-2641. For JeffBanks documents, make your request to William H. Lamb,
Corporate Secretary, JeffBanks, Inc., 1845 Walnut Street, Philadelphia, PA
19103; telephone (215) 861-7000. We will respond to your request within one
business day by sending the requested documents by first class mail or other
equally prompt means. To ensure timely delivery of the documents in advance of
the meetings, you should request documents by September 27, 1999.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What do I need to do now?
A: Just indicate on your proxy card how you want to vote with respect to
the merger. Sign and mail it in the enclosed prepaid return envelope as
soon as possible so that your shares may be represented and voted at
the special meeting.
Q: Can I change my vote after I have mailed my signed proxy card?
A: Yes. There are three ways in which you, as a shareholder of either
Hudson United or JeffBanks, may revoke your proxy and change your vote.
First, you may send a written notice of revocation to the corporate
secretary. (Information on how to contact the corporate secretary of
JeffBanks or Hudson United is contained in the last item on this page.)
Second, you may complete and submit a new proxy with a later date.
Third, you may attend your company's meeting and request a return of
your proxy or vote in person. Simply showing up at the meeting will not
alone revoke your proxy.
Q: If I am a JeffBanks shareholders, should I send in my stock
certificates now?
A: No. After the merger is completed, Hudson United's exchange agent will
send you written instructions for exchanging your stock certificates.
Q: When do you expect the merger to be completed?
A: We currently expect the merger to be completed during the fourth
quarter of 1999. However, the exact time when the merger will be
completed is dependent upon receipt of shareholder approval and bank
regulatory approval, and satisfaction of a number of other conditions,
some of which are not under Hudson United's or JeffBanks' control.
Q: Whom should I call with questions or to obtain additional copies of
this document?
A: You should contact either:
William H. Lamb, Corporate Secretary
JeffBanks, Inc.
1845 Walnut Street
Philadelphia, PA 19103
(215) 861-7000
D. Lynn Van Borkulo-Nuzzo, Corporate Secretary
Hudson United Bancorp
1000 MacArthur Boulevard
Mahwah, NJ 07430
(201) 236-2641
<PAGE>
SUMMARY
This is a summary of certain information regarding the proposed merger
and the shareholder meetings to vote on the merger. Because this is a summary,
it does not contain all the detailed information contained elsewhere in this
document. We urge you to carefully read the entire document, including the
Appendixes, before deciding how to vote.
What this Document is About
The Boards of Directors of JeffBanks, Inc. and Hudson United Bancorp
have approved the merger of JeffBanks into Hudson United. The merger cannot be
completed unless both companies' shareholders approve it. The JeffBanks and
Hudson United Boards have each called a special meeting of their respective
shareholders to vote on the merger. This document is the proxy statement used by
both boards to solicit proxies for those meetings. It is also the prospectus of
Hudson United regarding the common stock Hudson United will issue if the merger
is completed.
Voting on the Merger
JeffBanks (see page 25)..... JeffBanks has selected the close of business on
August 10, 1999 as the record date for its
meeting. Each of the __________ shares of
JeffBanks common stock outstanding on the record
date are entitled to vote at the JeffBanks
meeting. A majority of the votes cast at the
JeffBanks meeting, whether in person or by proxy,
must be cast in favor of the merger for it to be
approved. The JeffBanks Board of Directors has
unanimously approved the merger agreement and
unanimously recommends that JeffBanks shareholders
vote "FOR" the merger agreement.
Hudson United (see page 28). Hudson United has selected 3:00 p.m. on August 13,
1999 as the record date for its meeting. Each of
the __________ shares of Hudson United common
stock outstanding on the record date are entitled
to vote at the Hudson United meeting. A majority
of the votes cast at the Hudson United meeting,
whether in person or by proxy, must be cast in
favor of the merger for it to be approved. The
Hudson United Board of Directors has unanimously
approved the merger agreement and unanimously
recommends that Hudson United shareholders vote
"FOR" the merger agreement.
The Merger
General Description (see
page 30).................. JeffBanks will merge with Hudson United, with
Hudson United as the surviving entity. The merger
will be completed on a date determined by Hudson
United, which must be between seven and ten
business days after all material conditions to
closing have been met, unless Hudson United and
JeffBanks agree on a different closing date. The
terms of the proposed merger are set forth in a
merger agreement signed by Hudson United and
JeffBanks and their bank subsidiaries. A copy of
the merger agreement is attached as Appendix A to
this document and is incorporated in it by
reference.
Exchange Ratio is 0.95
shares of Hudson United
common stock for each
JeffBanks share
(see page 30).............. In the merger, JeffBanks shareholders will receive
0.95 shares of Hudson United common stock for each
share of JeffBanks common stock. If there is any
stock split, stock dividend or similar transaction
affecting Hudson United common stock before the
closing, the 0.95 exchange ratio will be adjusted
appropriately. The exchange ratio may be also be
adjusted as summarized under "Terminating Merger
Agreement" on page 52 and as more fully described
under "Special Termination Provisions" on pages
53-54.
No Federal Income Tax
on shares received in
the Merger (see page 55)......Hudson United's counsel, Pitney, Hardin, Kipp &
Szuch, has delivered its opinion that the merger
will qualify as a tax-free reorganization. This
means that the conversion of JeffBanks stock into
Hudson United stock will be tax-free for Hudson
United, JeffBanks and the JeffBanks shareholders.
JeffBanks shareholders will recognize no taxable
gain or loss until they sell the Hudson United
common stock that they receive in the merger. The
basis of the Hudson United common stock received
by JeffBanks shareholders will be the basis of the
JeffBanks common stock converted in the merger.
The holding period of the Hudson United common
stock will include the holding period of the
JeffBanks common stock converted.
We urge JeffBanks shareholders to read the more
complete description of the merger's tax
consequences on pages 55 - 56 and to consult their
own tax advisors as to the specific tax
consequences of the merger to them under
applicable laws.
Opinion of Goldman, Sachs
& Co. (see page 35)......... On June 28, 1999, Goldman, Sachs & Co. delivered
its written opinion addressed to the board of
directors of Hudson United, to the effect that, as
of such date, the exchange ratio was fair from a
financial point of view to Hudson United. The
opinion of Goldman Sachs does not constitute a
recommendation as to how any holder of Hudson
United common stock should vote with respect to
the merger agreement.
The full text of the written opinion of Goldman
Sachs, dated June 28, 1999, which sets forth
assumptions made, matters considered and
limitations on the review undertaken in connection
with the opinion, is attached as Appendix C and is
incorporated by reference in this document. You
should read the opinion in its entirety.
Opinion of Keefe, Bruyette
& Woods, Inc. (see page 42). Keefe, Bruyette & Woods, Inc. is JeffBanks'
financial advisor on the merger. As of the date of
the merger agreement, Keefe, Bruyette rendered its
opinion that the exchange ratio in the merger was
fair to JeffBanks' shareholders from a financial
point of view. You can read Keefe, Bruyette's
fairness opinion, which is Appendix D to this
document. For information on how Keefe, Bruyette
arrived at its opinion, see pages 42 - 47.
The full text of the written opinion of Keefe
Bruyette, dated June 28, 1999, which sets forth
assumptions made, matters considered and
limitations on the review undertaken in connection
with the opinion, is attached as Appendix D and is
incorporated by reference in this document. You
should read the opinion in its entirety.
Share Information and
Market Prices (see page 16) Hudson United common stock is listed on the New
York Stock Exchange under the symbol "HU" and
JeffBanks common stock is traded on the NASDAQ
National Market under the symbol "JEFF". The
following table lists the last sale prices of
Hudson United common stock and JeffBanks common
stock on June 28, 1999, the last day before the
merger agreement was announced, and on August __,
1999, a date shortly before the date of this proxy
statement. The table also presents the equivalent
value of Hudson United common stock per JeffBanks
share, computed by multiplying the last sale price
of Hudson United common stock on the dates
indicated by the 0.95 exchange ratio. We urge you
to obtain current market quotations for Hudson
United common stock and JeffBanks common stock.
Because the exchange ratio is fixed and trading
prices fluctuate, JeffBanks shareholders are not
assured of receiving any specific market value of
Hudson United common stock.
<PAGE>
<TABLE>
<CAPTION>
Equivalent Value of
Closing Sale Closing Sale Hudson United
Price Per Share Price Per Share Common Stock Per
of Hudson United of JeffBanks Share of JeffBanks
Common Stock Common Stock Common Stock
Date
<S> <C> <C> <C>
June 28, 1999 $ 34.94 $ 28.00 $ 33.19
August__, 1999 -- -- --
</TABLE>
Cash Instead of Fractional
Shares (see page 30)...... JeffBanks shareholders will not receive fractional
shares of Hudson United common stock in the
merger. Instead they will receive, without
interest, a cash payment equal to the fractional
share interest they otherwise would have received,
multiplied by the value of Hudson United common
stock. For this purpose, Hudson United common
stock will be valued at the median of its closing
prices during the ten trading days ending on the
fifth business day before the scheduled closing
date.
No Dissenters' Rights for
JeffBanks or Hudson United
Shareholders (see page 70) Under applicable New Jersey and Pennsylvania law,
neither Hudson United nor JeffBanks shareholders
have dissenters' rights of appraisal as to the
merger.
Exchanging Your Stock
Certificates (see page 51).. Promptly after the merger occurs, the exchange
agent will send JeffBanks shareholders letters of
transmittal and instructions for exchanging their
stock certificates for certificates representing
Hudson United common stock. JeffBanks shareholders
should not send in their stock certificates until
they receive instructions from the exchange agent.
Reselling the Stock You
Receive in the Merger (see
page 47).................... The shares of Hudson United common stock to be
issued in the merger will be registered under the
Securities Act of 1933. Except as noted below,
shareholders may freely transfer those shares
after they receive them. JeffBanks has identified
its directors, executive officers and others who
may be deemed "affiliates" of JeffBanks, and those
persons have entered into agreements with Hudson
United restricting their ability to transfer the
shares they will receive in the merger.
Conversion of JeffBanks
Stock Options (see page 31) In the merger, holders of options to acquire
JeffBanks common stock will receive options to
purchase Hudson United common stock. The new
options will have the same terms and conditions as
the old options, except that the number of shares
and the exercise price will be adjusted to reflect
the 0.95 exchange ratio.
Differences in
Shareholders' Rights (see
page 65).................... In the merger, each JeffBanks shareholder will
become a Hudson United shareholder. The rights of
JeffBanks shareholders are currently governed by
Pennsylvania corporate law and JeffBanks' articles
of incorporation and by-laws. The rights of Hudson
United shareholders are governed by New Jersey
corporate law and Hudson United's certificate of
incorporation and by-laws. The rights of JeffBanks
and Hudson United shareholders differ with respect
to voting requirements and various other matters.
See pages 65 - 73.
Reasons for the Merger (see
page 32).................... Hudson United entered into the merger agreement as
part of its ongoing strategy of growth through
acquisitions.
JeffBanks entered into the merger agreement in
order to benefit its shareholders and to provide
increased services to its customers.
Financial Interests of
JeffBanks' Directors and
Officers in the Merger (see
page 33).................... Pursuant to the merger agreement, Hudson United
will honor the existing employment agreement
between JeffBanks and Betsy Z. Cohen and the
existing employment contract between JeffBanks and
Robert B. Goldstein. Under these employment
agreements Mrs. Cohen and Mr. Goldstein would be
entitled to terminate their employment and receive
certain specified severence benefits.
Hudson United has agreed that, for a period of at
least three years after the merger, Hudson United
Bank will operate a separate division to be known
as the Jefferson Bank Division of Hudson United
Bank. The division will be assigned responsibility
for the former business banking operations of
JeffBanks' subsidiary banks and the southern New
Jersey branches of Hudson United Bank. The
division will also be assigned responsibility for
the residential mortgage lending and consumer
lending operations of Hudson United Bank. Hudson
United has agreed to appoint Mrs. Cohen as
Chairperson and Chief Executive Officer of the new
division, and Mr. Goldstein as President and Chief
Operating Officer of the new division. All current
JeffBanks directors will be invited to serve as
advisory directors for the new division.
Hudson United has agreed to appoint Mrs. Cohen and
Mr. William H. Lamb as directors of Hudson United
when the merger occurs. Mr. Lamb is currently a
JeffBanks director. At Hudson United's next annual
shareholders' meeting, Mrs. Cohen will be
nominated to serve for a three-year term. Hudson
United has also agreed to appoint three persons
designated by JeffBanks and reasonably acceptable
to Hudson United as directors of Hudson United
Bank when the merger occurs.
Hudson United has agreed to indemnify the
directors and officers of JeffBanks against
certain liabilities for a six-year period
following the merger.
On August 10, 1999, directors and executive
officers of JeffBanks and their affiliates owned
___________ shares or ____% of the JeffBanks
common stock.
For additional information on the benefits of the
merger to JeffBanks management, see pages 33-35.
Conditions to the Merger
(see page 48)............... Completion of the merger is contingent on a number
of conditions, including approval of the merger by
JeffBanks and Hudson United shareholders at their
respective meetings.
Regulatory Approval
(see page 50)............... Completion of the merger is subject to obtaining
all the necessary regulatory approvals. The merger
requires approvals from the FDIC, the New Jersey
Department of Banking and Insurance and the
Pennsylvania Department of Banking. A waiver
letter or an approval from the Federal Reserve
Board is also necessary before the merger can be
completed. Approval by bank regulators, however,
does not constitute an endorsement of the merger
or a determination that the terms of the merger
are fair to JeffBanks shareholders or Hudson
United shareholders.
We cannot assure you that the necessary regulatory
approvals will be granted or that they will be
granted on a timely basis without conditions
unacceptable to Hudson United or JeffBanks.
Terminating the Merger
Agreement (see page 52)..... JeffBanks has the right to terminate the merger
agreement if, between June 25, 1999 and the fifth
business day before the scheduled closing date,
the price of Hudson United common stock falls:
o By more than 30% in absolute terms, and
o By at least 20% more than an index
based on the common stock of 17
other financial institutions.
If JeffBanks exercises this termination right,
Hudson United can cancel the termination by
increasing the exchange ratio as provided in the
merger agreement. The merger agreement may be
terminated by either JeffBanks or Hudson United if
the merger has not occurred by April 30, 2000. For
a more complete description of these and other
termination rights available to JeffBanks and
Hudson United, see pages 52 - 54.
Amending the Merger
Agreement (see page 52)..... The merger agreement may be amended by Hudson
United and JeffBanks at any time before the
merger. However, an amendment which reduces the
amount or changes the form of consideration to be
received by JeffBanks shareholders cannot be made
following adoption of the merger agreement by
those shareholders without their approval.
Pooling Accounting
Treatment of the Merger
(see page 54)............... Hudson United expects to account for the merger as
a pooling-of-interests for financial reporting
purposes. One of the conditions to Hudson United
and JeffBanks' obligation to close the merger is
that Hudson United receive a letter from its
independent public accountants regarding
qualification of the merger for
pooling-of-interests accounting.
JeffBanks has Agreed
Not to Solicit Alternative
Transactions (see page 48).. JeffBanks has agreed not to encourage, negotiate
with, or provide any information to any person
other than Hudson United concerning an acquisition
transaction involving JeffBanks or Jefferson Bank
until the merger is completed or the merger
agreement is terminated. However, JeffBanks may
take certain of these actions if its Board of
Directors determines that it should do so. This
determination by the Board must be made after the
Board consults with counsel, and must be based on
the Board's fiduciary duties. This restriction,
along with the option described in the following
paragraph, may deter other potential acquirors of
control of JeffBanks.
JeffBanks has Granted
Hudson United a Stock
Option (see page 49)........ As a condition to Hudson United entering into the
merger agreement, Hudson United required JeffBanks
to grant Hudson United a stock option designed to
deter other companies from attempting to acquire
control of JeffBanks. The option gives Hudson
United the right to purchase for $26.00 per share
up to 1,212,706 shares of JeffBanks common stock,
representing approximately 11.5% of the
outstanding JeffBanks shares on the date the
option was granted. The option is exercisable only
if certain specific triggering events occur and
the merger does not occur. Hudson United has no
right to vote the shares covered by the option
before its exercise. Hudson United could recognize
a gain if it exercises the option and resells the
shares it acquires for more than the exercise
price. The option agreement also gives Hudson
United the right, under certain specified
circumstances, to require JeffBanks to repurchase
the option from Hudson United (or repurchase the
shares acquired by Hudson United upon exercise of
the option). The option may deter other potential
acquirors of JeffBanks because it would probably
increase the cost of acquiring all the shares of
JeffBanks common stock. Hudson United's exercise
of the option may also make pooling-of-interests
accounting treatment unavailable to another
potential acquiror. The agreement granting the
option is set forth as Appendix B to this
document.
The Companies
Hudson United (see page 20) Hudson United, a New Jersey corporation, is the
bank holding company for Hudson United Bank.
Hudson United Bank is a New Jersey-chartered
commercial bank that operates 167 branches located
in New Jersey, Connecticut and New York State. At
March 31, 1999, Hudson United had $7.0 billion in
assets. Hudson United's principal executive
offices are located at 1000 MacArthur Boulevard,
Mahwah, New Jersey 07430. Hudson United's
telephone number is (201) 236-2600.
JeffBanks (see page 24)..... JeffBanks, a Pennsylvania corporation, is the bank
holding company for Jefferson Bank and Jefferson
Bank of New Jersey. Jefferson Bank is a
Pennsylvania-chartered bank that operates 26
branches located in Chester, Delaware, Montgomery
and Philadelphia Counties in Pennsylvania.
Jefferson Bank of New Jersey is a New
Jersey-chartered bank that operates 5 branches
located in Burlington and Camden Counties in New
Jersey. At March 31, 1999, JeffBanks had $1.7
billion in assets. JeffBanks' principal executive
offices are located at 1845 Walnut Street,
Philadelphia, Pennsylvania 19103. JeffBanks'
telephone number is (215) 861-7000.
<PAGE>
SUMMARY FINANCIAL DATA OF HUDSON UNITED
The following is a summary of certain historical consolidated financial
data for Hudson United. The data presented for the years 1994 through 1998, and
as of the end of those years, comes from Hudson United's audited consolidated
financial statements. The data presented as of and for the three months ended
March 31, 1999 and 1998 comes from Hudson United's unaudited consolidated
financial statements. Hudson United's consolidated financial statements as of
December 31, 1998 and 1997, and for the years 1996, 1997 and 1998, are
incorporated by reference in this document. Hudson United's unaudited
consolidated financial statements as of and for the three months ended March 31,
1999 and 1998 are incorporated by reference in this document. See page 74.
In the opinion of Hudson United's management, the unaudited data shown
below reflects all adjustments necessary for a fair presentation of that data.
All such adjustments were normal, recurring adjustments. Results for the three
months ended March 31, 1999 do not necessarily indicate the results that you
should expect for any other interim period or for the year as a whole.
<PAGE>
<TABLE>
<CAPTION>
At or for the Year Ended December 31,
--------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------ ------------- ------------ ------------
(Dollars in thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Earnings Summary:
Interest income $ 468,547 $ 471,215 $ 442,514 $ 406,991 $ 344,341
Interest expense 214,353 216,280 200,566 173,695 139,916
------------- ------------ ------------- ------------ ------------
Net interest income 254,194 254,935 241,948 233,296 204,425
Provision for possible loan losses 14,374 12,775 17,140 20,072 15,109
------------- ------------ ------------- ------------ ------------
Net interest income after provision
for possible loan losses 239,820 242,160 224,808 213,224 189,316
Other income 33,299 54,180 40,257 28,624 32,641
Other expenses 232,096 181,308 204,679 169,924 163,077
------------- ------------ ------------- ------------ ------------
Income before income taxes 41,023 115,032 60,386 71,924 58,880
Income tax provision 17,872 45,205 23,490 23,597 21,311
============= ============ ============= ============ ============
Net income $ 23,151 $ 69,827 $ 36,896 $ 48,327 $ 37,569
============= ============ ============= ============ ============
Share Data:
Weighted average common shares
Outstanding (in thousands):
Basic 40,640 41,362 42,402 41,469 32,370
Diluted 41,696 43,635 44,990 44,066 35,299
Basic earnings per share $ 0.57 $ 1.67 $ 0.85 $ 1.14 $ 1.15
Diluted earnings per share 0.56 1.60 0.82 1.10 1.06
Cash dividends per common share 0.88 0.73 0.64 0.55 0.33
Book value per common share 11.30 12.19 12.67 12.99 11.21
Balance Sheet Summary:
Securities held to maturity $ 634,971 $ 764,831 $ 761,244 $ 910,738 $1,305,508
Securities available for sale 2,260,625 1,499,306 1,585,985 948,538 515,260
Loans 3,386,811 3,600,061 3,608,943 3,254,610 3,074,157
Total assets 6,778,661 6,606,140 6,498,856 5,642,997 5,400,971
Deposits 5,051,390 5,252,956 5,334,673 4,684,451 4,571,450
Stockholders' equity 456,815 507,101 533,364 536,042 395,419
Performance Ratios:
Return on average assets 0.35 % 1.08 % 0.60 % 0.88 % 0.72 %
Return on average equity 4.75 13.56 6.93 9.79 10.74
Dividend payout 154.39 43.71 75.29 48.25 28.70
Average equity to average assets 7.34 7.99 8.68 9.02 6.72
Net interest margin 4.10 4.25 4.23 4.55 4.25
Asset Quality Ratios:
Allowance for possible loan losses
to total loans 1.58 % 1.83 % 1.72 % 1.72 % 2.03 %
Allowance for possible loan losses
to non-performing loans 256 98 91 124 82
Non-performing loans to total loans
0.62 1.86 1.88 1.39 3.28
Non-performing assets to total
loans, plus other real estate 0.73 2.18 2.39 2.24 4.39
Net charge-offs to average loans 0.81 0.33 0.47 0.84 1.10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
At or for the Three Months ended March 31,
-------------------------------------------------
1999 1998
----------------- -----------------
<S> <C> <C>
Earnings Summary:
Interest income $ 111,142 $ 114,982
Interest expense 48,595 52,442
-------------- --------------
Net interest income 62,547 62,540
Provision for possible loan losses 2,500 6,278
-------------- --------------
Net interest income after provision for possible
loan losses 60,047 56,262
Other income 17,479 13,880
Other expenses 39,679 46,852
-------------- --------------
Income before income taxes 37,847 23,290
Income tax provision 13,246 8,356
============== ==============
Net income $ 24,601 $ 14,934
============== ==============
Share Data:
Weighted average common shares
Outstanding (in thousands):
Basic 39,983 41,016
Diluted 40,596 42,356
Basic earnings per share $ .62 $ .36
Diluted earnings per share .61 .35
Cash dividends per common share .25 .19
Book value per common share 10.79 12.38
Balance Sheet Summary:
Securities held to maturity $ 642,314 $ 815,812
Securities available for sale 2,422,566 1,490,195
Loans 3,424,314 3,597,638
Total assets 7,046,067 6,528,972
Deposits 4,931,967 5,314,501
Stockholders' equity 427,169 515,180
Performance Ratios:
Return on average assets 1.52 % .95 %
Return on average equity 23.10 11.84
Dividend payout 40.32 52.78
Average equity to average assets 6.59 8.01
Net interest margin 4.16 4.27
Asset Quality Ratios:
Allowance for possible loan losses to total Loans
1.59 % 1.94 %
Allowance for possible loan losses to
non-performing loans 284 97
Non-performing loans to total loans .56 2.01
Non-performing assets to total loans, plus other
real estate .59 2.28
Net charge-offs to average loans .18 .46
</TABLE>
<PAGE>
SUMMARY FINANCIAL DATA OF JEFFBANKS
The following is a summary of certain selected historical consolidated
financial data for JeffBanks. The data presented for the years 1994 through
1998, and as of the end of those years, comes from JeffBanks' audited
consolidated financial statements. The data presented as of and for the three
months ended March 31, 1999 and 1998 comes from JeffBanks' unaudited
consolidated financial statements. JeffBanks' consolidated financial statements
as of December 31, 1998 and 1997, and for the years 1996, 1997 and 1998, are
incorporated by reference in this document. JeffBanks' unaudited consolidated
financial statements as of and for the three months ended March 31, 1999 and
1998 are also incorporated by reference in this document. See page 74.
In the opinion of JeffBanks' management, the unaudited data shown below
reflects all adjustments necessary for a fair presentation of that data. All
such adjustments were normal, recurring adjustments. Results for the three
months ended March 31, 1999 do not necessarily indicate the results that you
should expect for any other interim period or for the year as a whole.
<PAGE>
<TABLE>
<CAPTION>
At or for the Year Ended December 31,
--------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------ ------------- ------------ ------------
(Dollars in thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Earnings Summary:
Interest income $ 123,493 $ 110,620 $ 107,100 $ 95,769 $ 71,970
Interest expense 63,720 55,652 51,941 45,991 32,349
------------- ------------ ------------- ------------ ------------
Net interest income 59,773 54,968 55,159 49,778 39,621
Provision for credit losses 5,963 3,700 10,115 8,891 2,717
------------- ------------ ------------- ------------ ------------
Net interest income after provision
for credit losses 53,810 51,268 45,044 40,887 36,904
Other income 15,215 13,203 10,496 9,398 8,405
Other expense 53,593 46,570 46,222 40,763 33,939
------------- ------------ ------------- ------------ ------------
Income before income taxes and
dividends on preferred stock 15,432 17,901 9,318 9,522 11,370
Income taxes 4,000 4,570 4,238 4,222 3,829
------------- ------------ ------------- ------------ ------------
Income before dividends on
preferred stock 11,432 13,331 5,080 5,300 7,541
Dividends on preferred stock of
subsidiary -- 467 142 1,613 1,600
------------- ------------ ------------- ------------ ------------
Net Income available to common
shareholders $ 11,432 $ 12,864 $ 4,938 $ 3,687 $ 5.941
============= ============ ============= ============ ============
Share Data:
Weighted average common shares
Outstanding (in thousands):
Basic 10,301 9,660 8,775 7,141 6,388
Diluted 10,956 10,317 9,247 7,573 6,601
Basic earnings per share $ 1.11 $ 1.33 $ 0.56 $ 0.52 $ 0.93
Diluted earnings per share 1.04 1.25 0.53 0.49 0.90
Cash dividends per common share 0.43 0.34 0.24 0.25 0.20
Book value 12.20 11.04 10.27 10.15 9.69
Balance Sheet Summary:
Securities held to maturity $ 677 $ 682 $ 75,770 $ 95,133 $ 121,492
Securities available for sale 301,366 364,501 205,021 207,408 132,290
Loans 1,229,939 1,066,144 917,383 898,202 718,502
Total assets 1,637,106 1,561,010 1,334,439 1,338,798 1,110,981
Deposits 1,276,280 1,085,627 972,265 1,036,648 871,730
Stockholders' equity 131,678 121,806 100,277 96,071 87,904
Performance Ratios:
Return on average assets 0.71 % 0.95 % 0.38 % 0.45 % 0.75 %
Return on average equity 9.04 11.50 4.97 5.16 8.93
Dividend payout ratio 40.76 26.31 47.23 43.98 16.66
Average equity to average assets 8.04 7.80 7.51 7.18 7.91
Net interest margin 4.18 4.28 4.43 4.56 4.21
Asset Quality Ratios:
Allowance for possible loan losses
to total loans 1.01 % 1.40 % 1.83 % 2.39 % 1.49 %
Allowance for possible loan losses
to non-performing loans 100 143 111 129 70
Non-performing loans to total loans 1.01 0.98 1.65 1.86 2.13
Non-performing assets to total
loans, plus other real estate 1.26 1.20 2.11 2.85 2.95
Net charge-offs to average loans 0.71 0.67 1.63 0.53 0.51
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
At or for the Three Months ended March 31,
-------------------------------------------------
1999 1998
----------------- -----------------
<S> <C> <C>
Earnings Summary:
Interest income $ 30,318 $ 29,535
Interest expense 15,242 15,002
-------------- --------------
Net interest income 15,076 14,533
Provision for credit losses 1,455 966
-------------- --------------
Net interest income after provision for credit
losses 13,621 13,567
Other income 4,094 3,344
Other expense 12,824 11,964
-------------- --------------
Income before income taxes 4,891 4,947
Income taxes 997 1,698
-------------- --------------
Net income $ 3,894 $ 3,249
============== ==============
Share Data:
Weighted average common shares
Outstanding (in thousands):
Basic 10,482 10,195
Diluted 10,953 11,040
Basic earnings per share $ .37 $ .32
Diluted earnings per share .36 .29
Cash dividends per common share 0.16 0.09
Book value 12.65 11.14
Balance Sheet Summary:
Securities held to maturity $ 676 $ 681
Securities available for sale 285,892 372,677
Loans 1,264,761 1,027,145
Total assets 1,684,467 1,549,458
Deposits 1,244,612 1,063,418
Stockholders' equity 132,989 124,426
Performance Ratios:
Return on average assets 0.94 % 0.85 %
Return on average equity 11.77 10.56
Dividend payout ratio 37.69 29.27
Average equity to average assets 7.95 8.08
Net interest margin 4.18 4.15
Asset Quality Ratios:
Allowance for possible loan losses to total loans 0.94 % 1.33 %
Allowance for possible loan losses to
non-performing loans 105 121
Non-performing loans to total loans 0.90 1.10
Non-performing assets to total loans, plus other
real estate 1.11 1.38
Net charge-offs to average loans 0.62 0.58
</TABLE>
<PAGE>
COMPARATIVE PER SHARE DATA
On this page we set forth the earnings per share, period-end book value
per share and cash dividends per share for the common stock of Hudson United and
JeffBanks for the periods noted. The data is presented on an historical and pro
forma basis, as well as pro forma equivalent per share data for JeffBanks. The
historical per share data was derived from the financial statements of Hudson
United and JeffBanks that are incorporated by reference herein. The pro forma
combined share data have been derived after giving effect to the JeffBanks
merger as if it occurred at the beginning of the period presented using the
pooling-of-interests method of accounting. The historical per share data for
both Hudson United and JeffBanks has been restated to retroactively reflect the
effect of stock dividends and stock splits. See "Pro Forma Financial
Information" on pages 57 - 63; "Summary Financial Data of Hudson United" on
pages 9 - 11 and "Summary Financial Data of JeffBanks" on pages 12-14. 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 data are presented and should not be
construed as being representative of future periods. The pro forma combined
information does not include the effects of other pending or recently completed
acquisitions or one-time merger-related and restructuring charges. See "Certain
Information about Hudson United - Recent Developments" on pages 21-24.
We have computed the pro forma equivalent per JeffBanks share by
multiplying the pro forma combined per share data (giving effect to the
JeffBanks merger) by the 0.95 exchange ratio.
The dividend per share data shown below do not necessarily indicate the
dividends that you should expect for any future period. The amount of future
dividends payable by Hudson United, if any, is at the discretion of Hudson
United's Board of Directors. When declaring dividends, the directors normally
consider Hudson United's and Hudson United Bank's cash needs, general business
conditions, dividends from subsidiaries and applicable governmental regulations
and policies. Pro forma amounts assume that Hudson United would have declared
cash dividends per share on Hudson United common stock, including the Hudson
United common stock issued in the merger for JeffBanks common stock, equal to
its historical cash dividends per share declared on Hudson United common stock.
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
Historical Equivalent per
Hudson Historical Pro Forma JeffBanks
United JeffBanks Combined Share
------ --------- -------- ----------
<S> <C> <C> <C> <C>
Three months Ended March 31, 1999
Net Income Per Share
Basic........................... $ .62 $ .37 $ .57 $ .54
Diluted......................... .61 .36 .56 .53
Book Value Per Share..................... 10.79 12.65 11.30 10.74
Cash Dividends Per Share................. .25 .16 .25 .24
Year Ended December 31, 1998
Net Income Per Share
Basic........................... .57 1.11 .69 .66
Diluted......................... .56 1.04 .66 .63
Cash Dividends Per Share................. .88 .43 .88 .84
Year Ended December 31, 1997
Net Income Per Share
Basic........................... 1.67 1.33 1.62 1.54
Diluted......................... 1.60 1.25 1.55 1.47
Cash Dividends Per Share................. .73 .34 .73 .69
Year Ended December 31, 1996
Net Income Per Share
Basic........................... .85 .56 .81 .77
Diluted......................... .82 .53 .78 .74
Cash Dividends Per Share................. .64 .24 .64 .61
</TABLE>
The first table below presents, for the periods indicated, the high and
low closing prices per share of Hudson United common stock and JeffBanks common
stock. The prices of Hudson United common stock and JeffBanks common stock have
been restated to give retroactive effect to stock dividends and stock splits.
The second table presents information concerning the last sale price of Hudson
United common stock and of JeffBanks common stock on June 28, 1999, the last
business day before the merger agreement was announced, and on ___________,
1999, a date shortly before the date of this proxy statement. The second table
also presents the equivalent value of Hudson United common stock per JeffBanks
share which we computed by multiplying the last sale price of Hudson United
common stock on the dates indicated by the 0.95 exchange ratio. Hudson United
common stock is listed on the New York Stock Exchange under the symbol "HU" and
JeffBanks common stock is traded on the NASDAQ National Market under the symbol
"JEFF". We urge you to obtain current market quotations for Hudson United common
stock and JeffBanks common stock. Because the exchange ratio is fixed and
trading prices fluctuate, JeffBanks shareholders are not assured of receiving
any specific market value of Hudson United common stock. The price of Hudson
United common stock when the merger becomes effective may be higher or lower
than its price when the merger agreement was signed, when this proxy statement
was mailed or when Hudson United or JeffBanks shareholders meet to vote on the
merger.
<PAGE>
<TABLE>
<CAPTION>
Closing Sale Closing Sale
Price Per Share Price Per Share
of Hudson United of JeffBanks
Common Stock Common Stock
------------ ------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1997:
First Quarter.................... $ 25.03 $ 21.44 $ 16.86 $ 15.14
Second Quarter................... 27.57 20.86 17.10 16.05
Third Quarter.................... 31.11 26.16 23.03 16.95
Fourth Quarter................... 37.99 30.05 28.80 20.40
1998:
First Quarter.................... $ 37.86 $ 32.28 $ 32.33 $ 25.80
Second Quarter................... 37.62 31.25 34.65 29.25
Third Quarter.................... 35.00 25.38 32.25 18.75
Fourth Quarter .................. 30.13 21.63 25.00 18.75
1999:
First Quarter.................... $ 34.25 $ 29.75 $ 22.25 $ 19.63
Second Quarter .................. 36.00 30.63 28.94 20.00
Third Quarter (through ________,
1999)............................
</TABLE>
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION
We present on this page certain unaudited combined condensed financial
information derived from the unaudited pro forma financial information for the
periods and at the dates indicated. The pro forma combined information gives
effect to the proposed JeffBanks merger accounted for as a pooling-of-interests,
as if the merger had been consummated for statement of income purposes on the
first day of the applicable periods and for balance sheet purposes on March 31,
1999. See "Pro Forma Financial Information" on pages 57 - 63. The summary pro
forma financial information is based on the historical financial statements of
Hudson United and JeffBanks incorporated by reference herein. See page 74. The
pro forma financial information assumes a 0.95 exchange ratio. The pro forma
combined information does not include the effect of the pending merger of Hudson
United with Southern Jersey Bancorp of Delaware, Inc., or the pending
acquisition of loans and deposits from Advest Bank or the recently completed
acquisition of Little Falls Bancorp. The financial information also does not
reflect one-time merger-related and restructuring charges which will be incurred
in connection with the merger and the pending acquisition of Southern Jersey.
See "Certain Information about Hudson United - Recent Developments" on pages
21-24.
You should read the summary pro forma financial information in
conjunction with the pro forma financial information and the related notes
thereto on pages 57 - 63 and the consolidated financial statements and related
notes incorporated by reference in this document. The pro forma financial
information does not necessarily indicate the results of operations which would
have been achieved had the merger been completed as of the beginning of the
periods for which that data are presented and should not be construed as being
representative of future periods.
<PAGE>
<TABLE>
<CAPTION>
Summary Pro Forma Unaudited Combined Condensed Financial Information
(In thousands, except for per share data)
For the
Three Months
Ended March 31, For the Years Ended December 31,
------------------- ------------------------------------------------
1999 1998 1997 1996
--------- ------------ ----------- ----------
<S> <C> <C> <C>
Net interest income before provision for possible loan losses.. $ 77,623 $ 313,967 $ 309,903 $ 297,107
Provision for possible loan losses............................. 3,955 20,337 16,475 27,255
Net interest income after provision for possible loan losses... 73,668 293,630 293,428 269,852
Income before income taxes..................................... 42,738 56,455 132,933 69,704
Net income..................................................... 28,495 34,583 83,158 41,976
Earnings per share
Basic..................................................... 0.57 0.69 1.62 0.81
Diluted................................................... 0.56 0.66 1.55 0.78
<CAPTION>
As of March 31,
1999
--------------------
<S> <C>
Balance Sheet:
Total assets................................................... $ 8,730,534
Total deposits................................................. 6,176,579
Total stockholders' equity..................................... 560,158
Book value per common share.................................... 11.30
</TABLE>
<PAGE>
INTRODUCTION
The Boards of Directors of JeffBanks and Hudson United have approved an
Agreement and Plan of Merger, dated as of June 28, 1999, by and among Hudson
United, Hudson United's subsidiary, Hudson United Bank, JeffBanks and JeffBanks'
two bank subsidiaries, Jefferson Bank and Jefferson Bank of New Jersey. The
merger agreement provides for JeffBanks to be merged with Hudson United, with
Hudson United as the surviving corporation. It also provides for JeffBanks'
subsidiary banks to be merged into Hudson United Bank. The merger cannot be
completed unless the shareholders of both JeffBanks and Hudson United approve
the merger agreement.
This document serves two purposes. It is the joint proxy statement
being used by the JeffBanks and Hudson United Boards of Directors to solicit
proxies for use at their special meetings called to seek shareholder approval of
the merger agreement. It is also the prospectus of Hudson United regarding the
common stock Hudson United will issue to JeffBanks shareholders if the merger is
completed. Thus, we sometimes refer to this document as the joint proxy
statement-prospectus.
This document describes the merger agreement in detail. A copy of the
merger agreement is attached as Appendix A to this document and is incorporated
in it by reference. We urge you to read this entire document and the appendices
carefully.
JeffBanks supplied all information and statements contained or
incorporated by reference in this document about itself and Hudson United
supplied all information and statements about itself.
You should rely only on the information contained in or incorporated by
reference in this document. We have not authorized anyone to provide you with
information that is different.
FORWARD LOOKING STATEMENTS
This document contains and incorporates by reference certain
forward-looking statements regarding the financial condition, results of
operations and business of Hudson United and JeffBanks. Those statements are not
historical facts and include expressions about Hudson United's and/or JeffBanks'
o confidence,
o strategies and expressions about earnings,
o new and existing programs and products,
o relationships,
o opportunities,
o technology, and
o market conditions.
You may identify these statements by looking for
o forward-looking terminology like "expect", "believe" or "anticipate",
or
o expressions of confidence like "strong" or "on-going", or
o similar statements or variations of those terms.
These forward-looking statements involve certain risks and uncertainties. Actual
results may differ materially from the results the forward-looking statements
contemplate because of, among others, the following possibilities:
o Hudson United does not realize expected cost savings or revenue
enhancements from the merger or from Hudson United's other acquisitions
as anticipated;
o deposit attrition, customer loss or revenue loss following the merger
or following Hudson United's other acquisitions is greater than
expected;
o competitive pressure in the banking and financial services industry
increases significantly;
o changes occur in the interest rate environment;
o Hudson United's Year 2000 compliance program does not address Year 2000
computer problems effectively; or
o general economic conditions, either nationally or in the states in
which Hudson United operates, are less favorable than expected.
Neither Hudson United nor JeffBanks assumes any obligation for updating its
forward-looking statements at any time.
CERTAIN INFORMATION ABOUT HUDSON UNITED
General
Hudson United is a New Jersey corporation and bank holding company.
Hudson United's principal operating subsidiary is Hudson United Bank. Hudson
United Bank is a full service commercial bank that serves small and mid-sized
businesses and customers through:
o more than 85 branches in Northern New Jersey,
o more than 45 offices located mainly in Fairfield, Hartford, Middlesex
and New Haven counties in Connecticut, and
o more than 30 branches in Dutchess, Orange, Putnam and Rockland Counties
in New York.
Until March, 1999, Hudson United maintained separate bank operating subsidiaries
in Connecticut, New Jersey and New York which were merged into Hudson United
Bank at that time.
Hudson United's strategy has been to enhance profitability and build
market share through both internal growth and acquisitions. Hudson United has
completed over 25 acquisitions since 1990, and Hudson United has added over 140
branches and over $6 billion in assets through acquisitions this decade.
Hudson United is continually evaluating acquisition opportunities and
frequently conducts discussions, certain financial analyses and due diligence
activities in connection with possible acquisitions. As a result, acquisition
discussions and, in some cases, negotiations frequently take place and future
acquisitions involving cash, debt or equity securities can be expected.
Acquisitions typically involve the payment of a premium over book and market
values, and, therefore, some dilution of Hudson United's book value and net
income per common share may occur in connection with any future transactions.
From time to time, Hudson United may issue new equity or debt securities to fund
its acquisition plans or for other purposes. Hudson United believes it has
successfully managed its acquisitions to date to improve its core earnings.
However there can be no assurance that Hudson United will continue to
effectively manage the risks involved. If acquisitions are not managed
effectively or acquired institutions are not assimilated efficiently, Hudson
United's business, financial condition, and results of operations may be
adversely impacted.
As of March 31, 1999, Hudson United had:
o consolidated assets $ 7.0 billion
o deposits $ 4.9 billion
o stockholders' equity $ 427.2 million
o loans $ 3.4 billion
Hudson United's principal executive offices and telephone number are:
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
(201) 236-2600
Recent Developments
Second Quarter Earnings Release. On July 15, 1999, Hudson United
reported second quarter earnings of $25.5 million, or $0.63 per share on a
diluted basis, compared with operating earnings of $21.0 million, or $0.50 per
share for the same period in 1998. The 1998 operating earnings exclude $25.2
million pre-tax ($16.5 million after-tax) of merger-related and restructuring
charges resulting from 1998 acquisitions. Net income, including such
merger-related and restructuring charges for the 1998 period, was $4.6 million.
Hudson United also reported on July 15, 1999 that its total assets at June 30,
1999 were $7.2 billion, compared to $6.8 billion at year-end 1998. Total loans
at June 30, 1999 were $3.5 billion, an increase of $151 million from December
31, 1998. At June 30, 1999, total deposits were $5.0 billion, stockholders'
equity was $423 million and book value per common share was $10.70.
Little Falls Bancorp. On May 20, 1999, Hudson United completed its
previously announced acquisition of Little Falls Bancorp, Inc. and Little Falls'
wholly-owned banking subsidiary, Little Falls Bank. In the merger, 51% of the
Little Falls' common stock was converted into Hudson United common stock, and
49% of the Little Falls' common stock was exchanged for $20.64 in cash per
share. As of March 31, 1999, Little Falls had total assets of approximately $351
million, total deposits of approximately $244 million and stockholders' equity
of approximately $37 million.
Southern Jersey Pending Acquisition. On June 29, 1999, Hudson United
announced the signing of a definitive agreement to acquire Southern Jersey
Bancorp of Delaware, Inc. Pursuant to the merger agreement, Hudson United will
acquire Southern Jersey in a tax-free stock-for-stock exchange which is intended
to be accounted for as a pooling-of-interests. Under the terms of the merger
agreement, each share of Southern Jersey will be exchanged for 1.26 shares of
common stock. At March 31, 1999, Southern Jersey had $465 million in total
assets, $241 million of total loans, $429 million of total deposits and $31
million of stockholders' equity.
During 1998, Southern Jersey suffered substantial losses and Southern
Jersey and its subsidiary, The Farmers and Merchants National Bank of Bridgeton,
are both subject to bank regulatory actions. Southern Jersey suffered a net loss
of $7.8 million for the year ending December 31, 1998. During 1998, Southern
Jersey charged off $12.5 million, or 4.63%, of its total loans. At year end
1998, $16.2 million, or 6.01%, of its total loans were in non-accrual status. In
connection with these problems and the related failure of internal controls in
the bank's loan department, the Office of Comptroller of the Currency, the OCC,
entered into a memorandum of understanding with Farmers and Merchants on
December 10, 1998, which among other things required the bank to maintain a 6%
leverage ratio and hire a new chief operating officer. On February 28, 1999, the
leverage ratio was only 5.76% and the bank had not hired a new chief operating
officer. On May 10, 1999, the Company hired a new chief executive officer. On
May 24, 1999, the OCC and the bank entered into a consent order, a more serious
form of bank regulatory action, which among other things required the bank to
take a series of actions to improve its compliance, asset quality, and capital
and to maintain a 5.5% leverage ratio through June 30, 1999 and achieve a 6%
leverage ratio by September 30, 1999. Southern Jersey presently believes that it
is in compliance with the consent order except for five items for which it has
asked the OCC for a waiver due to the proposed merger. On January 28, 1999, the
Federal Reserve Bank of Philadelphia entered into a memorandum of understanding
with Southern Jersey, which prohibited Southern Jersey from paying dividends or
incurring debt and required Southern Jersey, among other things, to take a
series of actions intended to improve its operations and compliance procedures.
During the first quarter of 1999, Southern Jersey reported net income of
$256,000, but its non-performing loans increased to 9.22% of total loans.
Southern Jersey expects to report a loss for the second quarter of 1999. Its
leverage ratio at June 30, 1999 is expected to decline to 5.5%.
Hudson United anticipates that after the merger with Southern Jersey
closes, it will sell all of the non-performing assets and certain other
identified loans of Southern Jersey and take a related charge of up to $25
million, pre-tax, to write these assets down to their estimated realizable value
based upon an accelerated sale process.
Advest Pending Acquisition. On May 11, 1999, Hudson United announced
the signing of a definitive agreement to acquire the loans and other financial
assets and assume the deposit liabilities of Advest Bank, a subsidiary of The
Advest Group, Inc., and, separately, to enter into a strategic alliance with
Advest, Inc., the broker-dealer subsidiary of Advest Group. Pursuant to the
acquisition agreement, Hudson United will acquire all of the loans of the Advest
Bank and assume substantially all of the deposit liabilities of the Bank for a
premium. At March 31, 1999, Advest Bank had approximately $159 million in loans.
<TABLE>
<CAPTION>
Recently Completed Acquisitions
Asset Size
Institution (in millions) Type of Consideration Closing Date
(1)
- --------------------------------------- ----------------- ----------------------------------- -------------------
<S> <C> <C> <C>
Little Falls Bancorp, Inc., Little $ 351 Approximately 810,000 shares of May 20, 1999
Falls, New Jersey and its Hudson United common stock and
subsidiaries, including Little $25.1 million of cash
Falls Bank
</TABLE>
(1) Approximate total assets at March 31, 1999.
<PAGE>
<TABLE>
<CAPTION>
Pending Acquisitions
Asset Size Projected
Institution (in millions) (1) Type of Consideration Closing Date
- ---------------------------------------------------------- ----------------------------------- --------------------
<S> <C> <C> <C>
Southern Jersey Bancorp of Delaware, $ 465 Approximately 1,500,000 shares Fourth Quarter
Inc., Bridgeton, New Jersey, and of Hudson United common 1999
its subsidiaries, including The stock(2)
Farmers and Merchants National
Bank of Bridgeton
Assets and Liabilities of Advest $ 159 Assumption of Liabilities less Third Quarter
Bank, Hartford, Connecticut from value of assets (at book) 1999
The Advest Group, Inc.(3) and less premium
</TABLE>
(1) Approximate total assets at March 31, 1999.
(2) Consideration calculated using the 1.26 exchange ratio.
(3) Transaction includes a strategic alliance with Advest, Inc., a
broker-dealer.
If the pending acquisitions and the merger are consummated, and taking
into account the recently completed acquisition, Hudson United anticipates it
will have at least $9.0 billion in assets and approximately $550 million in
stockholders' equity.
In connection with its acquisitions which are accounted for as
pooling-of-interests transactions, Hudson United normally incurs significant
one-time merger related and restructuring charges and realizes significant
operating cost savings. Upon the announcement of significant acquisitions,
Hudson United initially estimates one-time merger-related and restructuring
costs, which are then reported on Form 8-K in connection with the announcement
of the acquisition. Thereafter, Hudson United does not update or repeat its
initial estimate of such one-time charges. Rather, Hudson United reports the
actual one-time merger-related and restructuring charges for the transaction in
the earnings release for the quarter in which the transaction closes. While such
one-time charges adversely effect earnings in the quarter in which a transaction
closes, Hudson United also reports its earnings excluding such one-time charges
to allow investors to focus on core earnings results. See "Information
Incorporated by Reference" at page 74.
At the time of the announcement of a significant transaction, Hudson
United sometimes also provides estimated cost savings but not revenue
enhancement estimates for the acquired institution. Hudson United does not
update or repeat its initial estimate of such cost savings. Historically, Hudson
United has realized significant cost savings in the acquisitions it has
consummated, and thereby significantly increased core earnings for the acquired
institutions. Hudson United relies on its quarterly earnings releases following
consummation to reflect the operating efficiencies achieved in its acquisitions.
In quarters in which one or more pooling transactions close, earnings
for that quarter will be adversely affected, sometimes significantly. However,
core earnings, to a limited extent in the closing quarter, and more fully in
subsequent quarters, will reflect cost savings and revenue enhancements. Hudson
United expects that due to the anticipated closings of the pending acquisitions
of both Southern Jersey and JeffBanks it will incur material one-time
merger-related and restructuring charges in the fourth quarter of 1999 which
will adversely affect reported earnings in the fourth quarter of 1999.
Hudson United attempts to price and structure its acquisitions to
provide earnings per share accretion, excluding one-time charges, calculated
before the restatement of prior period results required under
pooling-of-interests accounting treatment.
<PAGE>
CERTAIN INFORMATION ABOUT JEFFBANKS
General
JeffBanks was incorporated under Pennsylvania law on March 26, 1981 and
is registered under the Bank Holding Company Act. JeffBanks owns as its
principal assets Jefferson Bank and Jefferson Bank of New Jersey, through which
it provides a wide range of commercial and retail banking services in
Philadelphia, Pennsylvania and its immediately adjacent Pennsylvania and New
Jersey suburbs. JeffBanks currently operates an executive office, 31 branch
offices and a mortgage loan production office. The principal executive offices
of JeffBanks are located at 1845 Walnut Street, 10th Floor, Philadelphia,
Pennsylvania 19103, and its telephone number is (215) 861-7000.
During the past four years, JeffBanks has experienced substantial
growth, reflecting both internal growth and JeffBanks' acquisition of Pioneer
Mortgage, Inc. (1998), Regent National Bank (1998), United Valley Bank (1997)
and Constitution Bank (1995). For the period from January 1995 through March 31,
1999, JeffBanks' total assets have grown from $1.1 billion to $1.7 billion, its
deposits and interest-bearing liabilities have grown from $872 million to $1.2
billion and its shareholders' equity has grown from $87.9 million to $133.0
million. JeffBanks has enjoyed increased profitability during the period.
JeffBanks' income increased from $5.9 million for 1994 to $11.4 million for 1998
and from $3.2 million for the three months ended March 31, 1998 to $3.9 million
for the three months ended March 31, 1999. JeffBanks return on average assets
increased from 0.75% for 1994 to 0.94% for March 31, 1999.
JeffBanks' primary strategy for further growth is to establish a
reputation and market presence as the "small-and middle-market business bank."
JeffBanks has sought to implement its strategy by targeting the banking needs of
high net worth or high income individuals within its market area and the
businesses which they own or control. To attract this market, JeffBanks provides
specialized commercial lending, cash management, lease financing and personal
credit services. In particular, in its commercial lending JeffBanks seeks to
respond to its targeted market by customizing the terms of its loans to the
specific or special needs of individual customers or their businesses. Such
services are also intended to aid in generating loans and deposits from
JeffBanks' target market. JeffBanks believes that satisfactory attention to this
selected market requires a combination of the services of the type described
above (which JeffBanks believes are frequently unavailable at small banks) and
the personal attention of senior management (which JeffBanks believes is often
unavailable to such customers at major financial institutions). The customers in
this market generally require relatively small amounts of credit (almost never
in excess of $5 million, and often less than $1 million), but often seek
customized solutions to their financial requirements.
JeffBanks provides a wide range of banking services for both
individuals and businesses in addition to the more specialized services referred
to above. For individuals, JeffBanks provides services which include demand,
interest checking, money market, certificates of deposit and other savings
accounts. JeffBanks also offers home banking by computer, telephone banking
services, automatic teller services through the MAC inter-bank automated teller
system, night depository services, safe-deposit facilities, consumer loan
programs (including installment loans for home repairs and for the purchase of
consumer goods such as automobiles and boats), home equity loans, credit card
plans with Visa and MasterCard, revolving lines of credit, automobile leases,
residential construction loans and permanent mortgages for single family and
multi-family homes. For businesses, JeffBanks additionally offers short-term
loans for seasonal and working capital purposes, term loans secured by real
estate and other assets, loans for construction and expansion needs (including
residential construction), equipment and automobile leasing and loan programs,
revolving credit plans, cash management services and merchant credit card
depository programs. JeffBanks also makes indirect automobile loans by providing
consumer financing through automobile dealerships. Although JeffBanks does not
itself provide trust services, it has entered into strategic alliances with
several trust institutions to offer their services to JeffBanks customers.
Deposits obtained through JeffBanks' branch banking system have been
the principal source of funds for use in JeffBanks' lending activities. At March
31, 1999, JeffBanks had total deposits of $1.2 billion. Of this total, 48%
represented time deposits, 35% represented savings, money market and interest
checking deposits and 17% represented demand (non-interest bearing) deposits.
At March 31, 1999, JeffBanks had a net loan portfolio (excluding
mortgage loans held for sale) of $1.2 billion, representing 74% of total assets
at that date. The loan portfolio of JeffBanks is categorized into commercial,
commercial mortgage, construction, direct lease financing, consumer (including
indirect and direct automobile loans and home equity loans and lines of credit),
credit card and residential mortgage. At March 31, 1999, commercial mortgages
and other commercial loans, including construction loans and direct financing
leases were $783.9 million, or approximately 63% of JeffBanks net loan
portfolio. Although in making its loans, JeffBanks relies upon its evaluation of
the creditworthiness and debt-servicing capability of a borrower, its loans
often are secured by residential or commercial real property, automobiles,
equipment, fixtures and other collateral. However, significant exceptions may be
made to this general operating philosophy. JeffBanks does not generally engage
in non-recourse lending (i.e., lending as to which the lender looks only to the
asset securing the loan for repayment) and typically will require the principals
of any commercial borrower to personally guarantee the loan. JeffBanks does not
generally engage in out-of-area lending, although it may accept significant
amounts of out-of-area collateral security (such as a second home or other
collateral) from borrowers.
JeffBanks has been active in originating residential mortgage loans for
the purposes of resale to the Federal National Mortgage Association, the Federal
Home Loan Mortgage Corporation and other entities. For the year ended December
31, 1998, JeffBanks originated $203.1 million of mortgage loans and for the
three months ended March 31, 1999, JeffBanks originated $62.1 million of
mortgage loans. JeffBanks originates these loans primarily through its branches
and existing network of customers and generally retains the servicing on loans
sold. JeffBanks generally obtains commitments to sell its mortgage originations
as they are made to minimize the interest rate risk of holding such
originations. At March 31, 1999, JeffBanks had approximately $16.2 million of
mortgage loans held for sale.
Additionally, JeffBanks periodically purchases the right to service
other portfolios located in its geographic markets. Amounts so purchased are
subject to, and limited by, management's assessment of the prepayment risk of
the underlying portfolio. Under its mortgage servicing arrangements, JeffBanks
collects and remits loan payments, maintains related account records, makes or
monitors insurance and tax payments, makes any required physical inspections of
property, contacts delinquent mortgagors and supervises foreclosures and
property dispositions. At March 31, 1999, JeffBanks was servicing real estate
loans for lenders other than itself in an aggregate principal amount of
approximately $444.7 million.
Recent Developments
On July 15, 1999, JeffBanks reported second quarter earnings of $4.2
million or $.38 per share on a diluted basis, compared to operating earnings of
$1.9 million or $.17 per share for the same period in 1998. JeffBanks also
reported that net interest income on a fully tax-equivalent basis was $17.7
million for the first six months of 1999 as compared to $15.2 million for the
first six months of 1998 and that average total deposits amount to $1.27 billion
at June 30, 1999 as compared to $1.12 billion at June 30, 1998. At June 30,
1999, fully diluted book value per share was $11.78.
THE JEFFBANKS MEETING
Date, Time and Place
This document solicits, on behalf of the JeffBanks Board, proxies to be
voted at a special meeting of JeffBanks shareholders and at any adjournments or
postponements thereof. The JeffBanks meeting is scheduled to be held:
Friday October 1, 1999
9:30 a.m.
The Rittenhouse Hotel
210 West Rittenhouse Square
Philadelphia, PA 19103
Purpose
At the meeting, JeffBanks shareholders will consider and vote on:
o approval and adoption of the merger agreement
o any other matters that may properly be brought before the meeting.
Board Recommendation
The JeffBanks Board of Directors has unanimously approved the merger
agreement and unanimously recommends a vote FOR approval and adoption of the
merger agreement.
Record Date; Required Vote
The JeffBanks Board has fixed the close of business on August 10, 1999
as the record date for the JeffBanks meeting. Only holders of record of
JeffBanks common stock at that time are entitled to get notice of the meeting
and to vote at the meeting. On August 10, 1999, there were _________ shares of
JeffBanks common stock outstanding. Each of those shares will be entitled to one
vote on each matter properly submitted to the meeting.
The merger cannot be completed without JeffBanks shareholder approval.
Approval and adoption of the merger agreement requires the affirmative
vote of a majority of the total votes cast at the JeffBanks meeting either in
person or by proxy, provided a quorum (a majority of JeffBanks' outstanding
shares) is present. Each share of JeffBanks' common stock is entitled to one
vote on each matter to be acted upon at the JeffBanks meeting. The required
JeffBanks shareholder vote is based on the number of shares which are actually
voted, rather than the total number of outstanding shares of JeffBanks common
stock. Thus, if you abstain from voting or if you don't submit a proxy card and
don't vote in person at the JeffBanks meeting, your action will have no effect.
Also, broker non-votes will have no effect.
On June 30, 1999, the directors and executive officers of JeffBanks as
a group beneficially owned 2,503,634 shares of JeffBanks common stock,
representing 23.7% of the issued and outstanding shares. These figures are
calculated without counting shares that could be acquired by exercising stock
options because the shares underlying those options cannot be voted at the
meeting. The JeffBanks directors and executive officers have indicated their
intention to vote all the shares they beneficially own FOR the merger agreement.
The matters to be considered at the JeffBanks meeting are of great
importance to the shareholders of JeffBanks. Accordingly, we urge you to read
and carefully consider the information presented in this document, and to
complete, date, sign and promptly return the enclosed proxy in the enclosed
postage paid envelope.
Voting Rights; Proxies
If you properly execute a proxy card and send it to JeffBanks in a
timely manner, your proxy will be voted in accordance with the instructions you
indicate on the proxy card, unless you revoke your proxy before the vote. If you
send us a proxy card that does not instruct us how to vote, your shares will be
voted FOR approval and adoption of the merger agreement.
The JeffBanks Board is not aware of any matters that will come before
the meeting other than the vote on the merger. If any other matters come before
the JeffBanks meeting, the persons named on the enclosed proxy card will have
the discretion to vote on those matters using their best judgment, unless you
specifically withhold that authorization when you complete your proxy card.
You may revoke any proxy that you give at any time before it is used to
cast your vote. Simply showing up at the JeffBanks meeting will not alone revoke
your proxy. To revoke a proxy, you must file a written notice of revocation with
the JeffBanks Corporate Secretary, or deliver a properly executed proxy with a
later date to the JeffBanks Corporate Secretary or appear at the JeffBanks
meeting and request a return of your proxy or vote in person. The JeffBanks
Corporate Secretary will attend the JeffBanks meeting and, before that, can be
reached at the following address:
William H. Lamb
Corporate Secretary
JeffBanks, Inc.
1845 Walnut Street
Philadelphia, Pennsylvania 19103
Election inspectors appointed for the meeting will tabulate the votes
cast by proxy or in person at the JeffBanks meeting. The election inspectors
will determine whether a quorum is present. The election inspectors will treat
abstentions and "broker non-votes" as shares that are present but unvoted on the
matters as to which abstention is specified. Thus, abstentions will have no
effect upon approval of the merger agreement.
Solicitation of Proxies
In addition to using the mails, the directors, officers and employees
of JeffBanks may solicit proxies for the JeffBanks meeting from shareholders in
person or by telephone. These directors, officers and employees will not be
specifically compensated for their services. JeffBanks will also make
arrangements with brokerage firms and other custodians, nominees and fiduciaries
to send proxy materials to their principals and will reimburse those parties for
their expenses in doing so. JeffBanks will bear all costs of soliciting proxies
for the JeffBanks meeting, except that Hudson United will bear the cost of
printing this joint proxy statement-prospectus.
Quorum
At least a majority of the JeffBanks common stock issued and
outstanding and entitled to be voted at the JeffBanks meeting must be present in
person or by proxy to constitute a quorum.
<PAGE>
THE HUDSON UNITED MEETING
Date, Time and Place
This document solicits, on behalf of the Hudson United Board, proxies
to be voted at a special meeting of Hudson United Shareholders and at any
adjournments or postponements thereof. The Hudson United meeting is scheduled to
be held:
Thursday, September 30, 1999
2:30 p.m.
The Sheraton Crossroads
Crossroad Corporate Center
Route 17 North
Mahwah, NJ 07495
Purpose
At the meeting, Hudson United shareholders will consider and vote on:
o approval and adoption of the merger agreement
o any other matters that may properly be brought before the meeting.
Board Recommendation
The Hudson United Board of Directors has unanimously approved the
merger agreement and unanimously recommends a vote FOR approval and adoption of
the merger agreement.
Record Date; Required Vote
The Hudson United Board has fixed 3:00 p.m. on August 13, 1999 as the
record date for the Hudson United meeting. Only holders of record of Hudson
United common stock at that time will be entitled to receive notice of, and to
vote at, the Hudson United meeting. On August 13, 1999, there were ____________
shares of Hudson United common stock outstanding and entitled to vote at the
Hudson United meeting. Each of those shares will be entitled to one vote on each
matter properly submitted to the meeting.
The merger cannot be completed without Hudson United shareholder
approval. A majority of the shares of Hudson United common stock represented and
voting at the Hudson United meeting, in person or by proxy, must vote
affirmatively in order to approve the merger agreement.
Each share of Hudson United's common stock is entitled to one vote on
each matter to be acted upon at the Hudson United meeting. The required Hudson
United shareholder vote is based on the number of shares which are actually
voted, rather than the total number of outstanding shares of Hudson United
common stock. Thus, if you abstain from voting or if you don't submit a proxy
card and don't vote in person at the Hudson United meeting, your action will
have no effect. Also, broker non-votes will have no effect.
On August 13, 1999, the directors and executive officers of Hudson
United as a group beneficially owned ________ shares of Hudson United common
stock, representing ___% of the issued and outstanding shares. These figures are
calculated without counting shares that could be acquired by exercising stock
options since the shares underlying those options can't be voted at the meeting.
The Hudson United directors and executive officers have indicated that they
intend to vote all the shares they beneficially own FOR the merger agreement.
We urge you to read and carefully consider the information presented in
this document, and to complete, date, sign and promptly return the proxy in the
postage paid envelope provided.
Voting Rights; Proxies
If you properly execute a proxy card and send it to Hudson United in a
timely manner, your proxy will be voted in accordance with the instructions you
indicate on the proxy card, unless you revoke your proxy prior to the vote. If
you send us a proxy card that does not instruct us how to vote, your shares will
be voted FOR approval and adoption of the merger agreement.
The Hudson United Board is not aware of any matters that will come
before the meeting other than the vote on the merger. If any other matters come
before the Hudson United meeting, the persons named on the enclosed proxy card
will have the discretion to vote on those matters using their best judgment,
unless you specifically withhold that authorization when you complete your proxy
card.
You may revoke any proxy that you give at any time before it is used to
cast your vote. Simply showing up at the Hudson United meeting will not
automatically revoke your proxy. To revoke a proxy, you must either file a
written notice of revocation with the Hudson United Corporate Secretary, or
deliver a properly executed proxy with a later date to the Hudson United
Corporate Secretary. The Hudson United Corporate Secretary will be in attendance
at the Hudson United meeting and, prior thereto, can be reached at the following
address:
D. Lynn Van Borkulo-Nuzzo
Corporate Secretary
Hudson United Bancorp
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Election inspectors appointed for the meeting will tabulate the votes
cast by proxy or in person at the Hudson United meeting. The election inspectors
will determine whether or not a quorum is present. The election inspectors will
treat abstentions and "broker non-votes" as shares that are present and entitled
to vote for purposes of determining a quorum where
o proxies are marked as abstentions,
o shareholders who have not filed proxies appear in person but abstain
from voting, or
o a broker indicates on a proxy that it does not have discretionary
authority regarding certain shares.
Solicitation of Proxies
In addition to using the mails, the directors, officers and employees
of Hudson United may solicit proxies for the Hudson United meeting from
shareholders in person or by telephone. These directors, officers and employees
will not be specifically compensated for their services. Hudson United may
retain a proxy-soliciting firm to assist it in soliciting proxies. If so, Hudson
United would pay the proxy-soliciting firm a fee and reimburse it for certain
out-of-pocket expenses. Hudson United will also make arrangements with brokerage
firms and other custodians, nominees and fiduciaries to send proxy materials to
their principals and will reimburse those parties for their expenses in doing
so. Hudson United will bear all costs of soliciting proxies for the Hudson
United meeting.
Quorum
At least a majority of the Hudson United common stock issued and
outstanding and entitled to be voted at the Hudson United meeting must be
present in person or by proxy to constitute a quorum.
THE PROPOSED MERGER
We have attached a copy of the merger agreement as Appendix A to this
joint proxy statement-prospectus and it is incorporated by reference into this
document. 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 for the merger of JeffBanks with and into
Hudson United, with Hudson United as the surviving entity. The merger will be
completed on a date determined by Hudson United, which must be between seven and
ten business days after all material conditions to closing have been met. The
exact date will be set by notice Hudson United delivers to JeffBanks. However,
Hudson United and JeffBanks may agree on a different closing date. The parties
currently anticipate closing during the fourth quarter of 1999. The merger will
become effective at the time specified in certificates of merger which Hudson
United will file with the Department of the Treasury of the State of New Jersey
and the Secretary of State of the Commonwealth of Pennsylvania following the
closing. Hudson United and JeffBanks anticipate that the merger will become
effective at the close of business on the closing date. Immediately after the
merger is effective, Hudson United will merge Jefferson Bank and Jefferson Bank
of New Jersey with Hudson United Bank, with Hudson United Bank as the surviving
entity. The exact closing date and the exact time the merger will become
effective are dependent upon satisfaction of numerous conditions, some of which
are not under Hudson United's or JeffBanks' control.
Consideration; Exchange Ratio; Cash Instead of Fractional Shares
When the merger becomes effective, except as noted below, each
outstanding share of JeffBanks common stock will be converted into the right to
receive 0.95 shares of Hudson United common stock. The exchange ratio is subject
to adjustment to take into account any stock split, stock dividend or similar
transaction with respect to Hudson United common stock between the date of the
merger agreement and the time the merger becomes effective. The exchange ratio
is also subject to adjustment as described under "Special Termination
Provisions" on pages 53-54. Certain shares of JeffBanks common stock held by
JeffBanks or by Hudson United or its subsidiaries will be cancelled in the
merger and will not be converted into Hudson United common stock.
Instead of fractional shares of Hudson United common stock, JeffBanks
shareholders will receive, without interest, a cash payment equal to the
fractional share interest to which they would otherwise be entitled multiplied
by the value of Hudson United common stock. For this purpose, Hudson United
common stock will be valued at the median of its closing prices during the ten
trading days ending on the fifth business day before the scheduled closing date.
The median will be determined by discarding the four highest and four lowest
closing prices for Hudson United common stock during the ten-day pricing period
and then averaging the remaining two closing prices. All shares of Hudson United
common stock to be issued to a JeffBanks shareholder will be combined to make as
many whole shares as possible before calculating that shareholder's fractional
share interest.
The price of Hudson United common stock at the time the merger becomes
effective may be higher or lower than the market price
o when the merger agreement was signed,
o when this proxy statement was mailed,
o when the JeffBanks shareholders meet to vote on the merger, or
o when JeffBanks shareholders receive Hudson United stock certificates
from the exchange agent following the merger.
We urge you to obtain current market quotations for the Hudson United common
stock and the JeffBanks common stock.
Conversion of JeffBanks Options
The merger agreement provides that each outstanding option to purchase
JeffBanks common stock granted under the JeffBanks stock option plan will be
converted at the time the merger becomes effective into an option to purchase
Hudson United common stock. The terms of the new option will be determined as
follows:
o the right to purchase shares of JeffBanks common stock pursuant to
the old option will be converted in the new option into the right
to purchase that same number of shares of Hudson United common
stock multiplied by the exchange ratio,
o the option exercise price per share of Hudson United common stock
will be the previous option exercise price per share of JeffBanks
common stock divided by the exchange ratio, and
o in all other material respects the new option will be subject to
the same terms and conditions as governed the old option on which
it was based, including the vesting schedule and the length of
time within which the option may be exercised.
Hudson United has reserved for issuance the number of shares of Hudson
United common stock necessary to satisfy Hudson United's obligations under the
converted options. Hudson United has agreed to register those shares pursuant to
the Securities Act as soon as practicable after the merger becomes effective. As
of June 30, 1999, there were options outstanding for 1,428,392 shares of
JeffBanks common stock which would be converted in the merger as described
above.
Background of and Reasons for the Merger
Background
On March 10, 1999, Ken Neilson, Chairman and CEO of Hudson United, and
Robert B. Goldstein, President and Chief Operating Officer of JeffBanks, met at
a banking conference where Mr. Neilson indicated his interest in speaking with
officials of JeffBanks about banking issues in the Philadelphia and South Jersey
market. Mr. Goldstein suggested that he contact his office to set up such a
meeting.
On March 31, 1999, Mr. Neilson met with Mr. Goldstein and Betsy Z.
Cohen, Chairman and Chief Executive Officer of JeffBanks, at Mrs. Cohen's office
to discuss the possible combination of the two banks and to hear Mr. Neilson's
investor presentation. After that meeting, Mrs. Cohen and Mr. Goldstein had
conversations with Donald Delson of Keefe, Bruyette & Woods, Inc., regarding the
economic advantages of a merger with Hudson United compared to other potential
merger partners.
On April 23, 1999, Mr. Neilson, Mrs. Cohen and Mr. Goldstein met in Mr.
Neilson's office where they continued discussions about the possible
combination. Mr. Neilson, Mrs. Cohen and Mr. Goldstein all met again with Mr.
Delson in Princeton, New Jersey on May 18, 1999 to discuss specific issues
relating to structure and exchange ratios. After that meeting, Mrs. Cohen
requested Mr. Delson to prepare materials for presentation to JeffBanks' board
of directors.
Hudson United's board of directors met on May 18, 1999. The directors
discussed the possible merger with JeffBanks at length, then unanimously
approved moving forward with the merger.
JeffBanks' board of directors met on May 21, 1999, where Mr. Delson
made a presentation on the possible combination with Hudson United. The board of
directors determined to have Mr. Delson continue discussions with Hudson United
regarding the exchange ratio. The board of directors met again on June 22, 1999,
where Mr. Delson presented information on the value of a combination with Hudson
United versus a combination with certain other possible merger partners.
JeffBanks' board of directors determined to continue to pursue the Hudson United
combination.
On June 26, 1999, JeffBanks' board of directors convened by telephone
meeting where they discussed the results of JeffBanks' due diligence on Hudson
United and issues to be further discussed with Mr. Neilson regarding lending
activity of a separate Jefferson Bank Division. The Board gave unanimous consent
to continue the negotiations. Later that day, a telephone conference call
meeting was held with Mr. Neilson, John McIlwain and Chris Witkowski from Hudson
United and Mrs. Cohen, Mr. Goldstein and Mr. Edward Cohen (Chairman of the
Executive Committee and Board member) from JeffBanks and Mr. Delson and two of
his associates. Specific issues regarding due diligence and timing were
discussed in preparation for the subsequent Board meetings to discuss approval
of the Merger.
Early on the morning of June 28, 1999, JeffBanks' board of directors
met by telephone and heard presentations by Mrs. Cohen and Mr. Delson at which
Mr. Delson rendered an oral opinion that the exchange ratio was fair to
JeffBanks and its shareholders. After discussion, JeffBanks' board of directors
voted to proceed with the merger and recommended that the JeffBanks shareholders
vote to approve and adopt the merger agreement. Hudson United and JeffBanks
entered into the merger agreement on June 28, 1999.
Hudson United's Reasons for the Merger.
Hudson United entered into the merger agreement with JeffBanks as part
of Hudson United's ongoing strategy of growth through acquisitions.
Hudson United's acquisition strategy consists of identifying financial
institutions with business philosophies that are similar to Hudson United's,
which operate in markets that are geographically within or close to those of
Hudson United, 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, Hudson United has pursued
acquisitions of financial institutions in New Jersey and in other states which
are geographically close to Hudson United's current markets and which otherwise
meet Hudson United's acquisition goals. Hudson United's expressions of interest
in and merger with JeffBanks are consistent with this strategy. Hudson United
anticipates that combining the New Jersey operations of JeffBanks and Hudson
United will enhance Hudson United's ability to promote operational efficiencies
and services to the combined institutions' customers.
Recommendations of the Hudson United Board of Directors
The Hudson United Board believes that the merger is fair to, and in the
best interests of, Hudson United and its shareholders. The Hudson United Board
of Directors also believes the merged institution will be a more efficient and
capable competitor in the financial services industry. Accordingly, the Board
unanimously approved the merger agreement and merger and recommends that Hudson
United shareholders vote FOR the approval and adoption of the merger agreement
and merger.
The Hudson United Board of Directors unanimously recommends that all
shareholders of Hudson United vote FOR the approval of the merger agreement and
the merger.
JeffBanks' Reasons for the Merger. JeffBanks entered into the merger
agreement with Hudson United because of the benefits that it expects to provide
to its shareholders and its customers. JeffBanks anticipates that by combining
two financially strong banking organizations with a similar focus on small to
middle-market business banking in contiguous markets, a number of operating
efficiencies and business synergies will be achieved which will benefit the
shareholders. The merger is also consistent with JeffBanks' past expansion
strategy of bank, branch and non-bank financial acquisitions in order to support
its institutional growth.
JeffBanks expects the merger to provide it bank customers with
increased loan limits, a significantly larger number of deposit account choices,
a larger number of service and product options, the use of an all-inclusive
international department and asset-based lending services.
Recommendations of the JeffBanks Board of Directors
The JeffBanks Board believes that the merger is fair to, and in the
best interests of, JeffBanks and its shareholders. Accordingly, the Board
unanimously approved the merger agreement and merger.
The JeffBanks Board of Directors unanimously recommends that all
shareholders of JeffBanks vote for the approval of the merger agreement and the
merger.
Interests of Certain Persons in the Merger
In considering the recommendation of the JeffBanks Board regarding the
merger, JeffBanks shareholders should know that certain directors and officers
of JeffBanks have interests in the merger in addition to their interests as
shareholders of JeffBanks. These additional interests are described below, to
the extent they are material and are known to JeffBanks. The JeffBanks Board was
aware of these interests and considered them, among other matters, in approving
the merger agreement:
New Division; Board Membership; Advisory Board. Hudson United expects
that, for a period of at least three years after the merger, Hudson United Bank
will operate a separate division to be known as the Jefferson Bank Division of
Hudson United Bank. The division will be assigned responsibility for the former
business banking operations of JeffBanks' subsidiary banks and the southern New
Jersey branches of Hudson United Bank. The division will also be assigned
responsibility for the residential mortgage lending and consumer lending
operations of Hudson United Bank. Hudson United has agreed to appoint Mrs. Betsy
Z. Cohen as Chairperson and Chief Executive Officer of the new division, and Mr.
Robert B. Goldstein as Chief Operating Officer of the new division. Mrs. Cohen
and Mr. Goldstein are currently employed by JeffBanks as Chairman and Chief
Executive Officer and Chief Operating Officer, respectively. All current
JeffBanks directors will be invited to serve as advisory directors for the new
division.
Hudson United has agreed to appoint Mrs. Cohen and Mr. William H. Lamb
as directors of Hudson United when the merger occurs. Mr. Lamb is currently a
JeffBanks director. At Hudson United's next annual shareholders' meeting, Mrs.
Cohen will be nominated to serve for a three-year term. Hudson United has also
agreed to appoint three persons designated by JeffBanks and reasonably
acceptable to Hudson United as directors of Hudson United Bank when the merger
occurs.
Stock Benefits. When the merger becomes effective, each outstanding
option granted under the JeffBanks, Inc. Key Employee Stock Option Plan will be
converted into an option to purchase Hudson United common stock. All
outstanding, non-vested options will vest as a result of the merger. See
"Conversion of JeffBanks Options" on page 31.
Employment Agreements with Executive Officers. Pursuant to the merger
agreement, Hudson United will honor the existing employment agreement between
JeffBanks and Mrs. Cohen and the existing employment agreement between Jefferson
Bank and Mr. Goldstein. Under Mrs. Cohen's agreement, she receives base
compensation of $475,000 per year, incentive bonuses, stock option grants and
eligibility in all employee benefit plans. JeffBanks is also obligated to pay
the cost of premiums for a second-to-die insurance policy on the life of Mrs.
Cohen and her husband, Edward E. Cohen.
Mrs. Cohen may terminate her contract upon the approval of the merger
by the JeffBanks shareholders and receive the following termination benefits: an
amount equal to three times her average compensation (defined as the average of
the compensation received by Mrs. Cohen in the three most highly compensated
years during the previous eight years of employment) and continuation of life,
health, accident and disability insurance benefits for a period of 36 months.
Additionally, if the termination benefits become subject to any excise tax
imposed under Section 4999 of the Internal Revenue Code of 1986, JeffBanks is
required to pay Mrs. Cohen an additional sum such that the net amounts retained
by Mrs. Cohen, after paymetn of such excise taxes, shall equal the amount of
termination benefits equal to the amount of any such excise taxes imposed.
Under Mr. Goldstein's employment agreement, he is entitled to receive
base compensation of $350,000 per year, incentive bonuses and eligibility in all
employee benefit plans. If Mr. Goldstein terminates his employment agreement
within 270 days before or 180 after the merger becomes effective, he is entitled
to receive accrued benefits (base salary accrued through the termination date,
any required bonus, the amount required such tat Mr. Goldstein will retain his
termiantion benefits net of any excise taxes imposed under Section 4999 of the
Internal Revenue Code of 1986, and the present value of all other employee
benefits to which he participated on the termination date) and a severance
payment equal to 2.99 times the sum of Mr. Goldstein's base salary at
termination and any bonus payable in the year of termination.
Supplemental Executive Retirement Plan. JeffBanks has established a
supplemental employment retirement plan for Mrs. Cohen's benefit which will pay
to Mrs. Cohen, upon the later of her actual retirement or her reaching age 65, a
monthly retirement benefit equal to one-twelfth of the product of (i) 2 1/4%
multiplied by (ii) the number of years that she has been employed by JeffBanks,
or its affiliates, multiplied by (iii) her average compensation. Since Mrs.
Cohen is entitled to this benefit even if her employment contract is terminated,
Hudson United is expected continue the supplemental employment retirement plan.
Share Ownership. As of June 30, 1999, the directors of JeffBanks
beneficially owned in the aggregate approximately 23.7% of the issued and
outstanding shares of JeffBanks common stock. The directors of JeffBanks have
indicated their intention to vote in favor of the merger agreement. As of June
30, 1999, executive officers of JeffBanks who are not also directors
beneficially owned in the aggregate less than one percent of the issued and
outstanding shares of JeffBanks common stock. A director of Hudson United,
Donald P. Calcagnini, owns approximately 15,000 shares, or .15%, of JeffBank's
common stock.
Indemnification; Directors and Officers. The merger agreement requires
Hudson United to indemnify, for a period of six years after the merger takes
effect, each director, officer, employee or agent of JeffBanks or its subsidiary
banks to the fullest extent that JeffBanks or its subsidiary banks would have
been permitted under applicable law and its articles of incorporation and
by-laws had the merger not occurred. The indemnification is to cover any claims
made against an indemnified person because he or she served as a director,
officer, employee or agent of JeffBanks or its subsidiary banks, or acted as a
director, officer, employee or agent of a third party at the request of
JeffBanks or its subsidiary banks. The merger agreement also requires Hudson
United to provide JeffBanks' and its subsidiary banks' officers and directors
with directors' and officers' liability insurance for at least six years after
the merger takes effect upon terms and conditions substantially similar to
JeffBanks' and its subsidiary banks' existing directors' and officers' insurance
policies.
Opinion of Goldman, Sachs & Co.
On June 28, 1999, Goldman Sachs delivered its written opinion addressed
to the board of directors of Hudson United to the effect that, as of that date,
the exchange ratio was fair from a financial point of view to Hudson United.
Goldman Sachs did not act as Hudson United's financial advisor and did not
participate in the negotiation of the merger agreement. The exchange ratio was
arrived at solely through negotiations of Hudson United and JeffBanks.
The full text of the written opinion of Goldman Sachs, dated June 28,
1999, which sets forth assumptions made, matters considered and limitations on
the review undertaken in connection with the opinion, is attached as Appendix C
and is incorporated by reference in this document. You should read the opinion
in its entirety.
In connection with its opinion, Goldman Sachs reviewed, among other
things:
o the merger agreement;
o annual reports to shareholders and annual reports on Form 10-K of
Hudson United and JeffBanks for the five years ended December 31, 1998;
o interim reports to shareholders and quarterly reports on Form 10-Q of
Hudson United and JeffBanks;
o other communications from Hudson United and JeffBanks to their
respective shareholders;
o internal financial analyses and forecasts for Hudson United and
JeffBanks prepared by their respective managements; and
o pro forma combined financial analyses and forecasts prepared by the
management of Hudson United, including certain cost savings and
operating synergies projected by the management of Hudson United to
result from the merger.
Goldman Sachs also held discussions with members of the senior
managements of Hudson United and JeffBanks regarding the strategic rationale
for, and the potential benefits of, the merger and the past and current business
operations, financial condition and future prospects of their respective
companies. In addition, Goldman Sachs:
o reviewed the reported price and trading activity for the Hudson United
common stock and the JeffBanks common stock;
o compared financial and stock market information for Hudson United and
JeffBanks with similar information for other companies the securities
of which are publicly traded;
o reviewed the financial terms of recent business combinations in the
commercial banking industry; and
o performed other studies and analyses Goldman Sachs considered
appropriate.
Hudson United instructed Goldman Sachs to assume, for the purpose of
its opinion, that an agreement providing for the merger of Hudson United and
Southern Jersey Bancorp of Delaware, Inc. will be consummated on the basis and
with the financial consequences indicated in the pro forma combined forecasts
prepared by the management of Hudson United. Goldman Sachs did not act as Hudson
United's financial advisor in connection with, and was not asked to opine, and
did not opine, on the fairness of the merger of Hudson United and Southern
Jersey.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. Goldman Sachs assumed, with
the consent of Hudson United's board of directors, that the pro forma combined
forecasts prepared by the management of Hudson United were reasonably prepared
on a basis reflecting the best currently available estimates and judgments of
United Hudson and that such forecasts will be realized in the amounts and time
periods contemplated thereby. Goldman Sachs is not an expert in evaluating loan
and lease portfolios for purposes of assessing the adequacy of the allowances
for losses with respect thereto and assumed, with the consent of Hudson United's
board of directors, that such allowances for each of Hudson United and JeffBanks
was in the aggregate adequate to cover all such losses. In addition, Goldman
Sachs did not review individual credit files or make an independent evaluation
or appraisal of the assets and liabilities (including any hedge or derivative
positions) of Hudson United or JeffBanks or any of their subsidiaries and were
not furnished with any such evaluation or appraisal. Goldman Sachs assumed, with
the consent of Hudson United's board of directors, that the merger will be
accounted for as a pooling-of-interests under generally accepted accounting
principles. Goldman Sachs also assumed that all material governmental,
regulatory or other consents and approvals necessary for the consummation of the
merger will be obtained without any adverse effect on Hudson United or JeffBanks
or on the contemplated benefits of the merger. Goldman Sachs' opinion was
provided to the board of directors of Hudson United in connection with the
execution of the merger agreement, and the opinion does not constitute a
recommendation as to how any holder of Hudson United common stock should vote
with respect to the merger.
The following is a summary of the material financial analyses
undertaken by Goldman Sachs in connection with its opinion dated June 28, 1999.
The following summaries of financial analyses include information
presented in tabular format. You should read these tables together with the text
of each summary.
(1) Implied Premium Analysis. Goldman Sachs calculated the implied
premium being paid in the merger based on the ratio of the closing market price
of JeffBanks common stock on selected dates, and the average closing market
price of JeffBanks common stock during selected periods ending on June 25, 1999,
to the $34.75 closing market price of Hudson United common stock on June 25,
1999. The results are shown below:
<TABLE>
<CAPTION>
Implied Premium at
JeffBanks Common Stock 0.95 Exchange Ratio -
Date/Period Price/Average Price Implied Deal Price $33
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
June 25, 1999 $26.13 26.3%
5 days ending June 25, 1999 $25.94 27.2%
10 days ending June 25, 1999 $25.94 27.2%
May 21, 1999 $27.00 22.2%
May 14, 1999 $21.00 57.1%
30 days ending June 25, 1999 $25.29 30.5%
60 days ending June 25, 1999 $23.09 42.9%
90 days ending June 25, 1999 $23.01 43.4%
</TABLE>
(2) Historical Exchange Ratio Analysis. Goldman Sachs calculated the
ratio of the average weekly closing price per share of Hudson United common
stock to the average weekly closing price per share of JeffBanks common stock
for each trading week during the period from June 21, 1996 to June 18, 1999 and
compared those ratios with the exchange ratio.
(3) Historical Stock Price Performance. Goldman Sachs reviewed the
relationship between movements in the closing price of JeffBanks common stock
for the one- and three-year periods ended June 25, 1999 with (i) Standard &
Poor's 500 Composite Index, (ii) Standard & Poor's Regional Bank Index, (iii) an
index of market peers consisting of Sovereign Bancorp, Inc., Wilmington Trust
Corporation, Bryn Mawr Bank Corporation, Republic First Bancorp, Inc., TF
Financial and PSB Bancorp, and (iv) an index of Northeastern regional banking
companies consisting of M&T Bank Corporation, North Fork Bancorporation, Inc.,
Valley National Bancorp, Keystone Financial, Inc., Fulton Financial Corporation,
UST Corporation and Commerce Bancorp, Inc.
(4) Comparison of Selected Peers. Goldman Sachs reviewed and compared
selected financial information, ratios and multiples for Hudson United and
JeffBanks to corresponding financial information, ratios and multiples for seven
Northeastern regional banking companies, four market peers and five
large-capitalization banking companies:
<PAGE>
<TABLE>
<CAPTION>
Northeastern Regional Large-Capitalization
Banking Companies Market Peers Banking Companies
----------------- ------------ -----------------
<S> <C> <C>
M&T Bank Corporation Sovereign Bancorp, Inc. First Union Corporation
North Fork Bancorporation, Inc. Wilmington Trust Corporation Fleet Financial Group, Inc.
Valley National Bancorp Bryn Mawr Bank Corporation PNC Bank Corp
Keystone Financial, Inc. Republic First Bancorp, Inc. KeyCorp
Fulton Financial Corporation Summit Bancorp
UST Corporation
Commerce Bancorp, Inc.
</TABLE>
The selected companies were chosen because they are banking companies
with operations that for purposes of analysis may be considered similar to
Hudson United and JeffBanks. The multiples and ratios were calculated using the
closing prices for the common stocks of Hudson United and JeffBanks and each of
the selected companies on June 25, 1999 and, except as otherwise indicated
below, were based on the most recent publicly available information. Goldman
Sachs' analyses of the selected companies compared the following to the results
for Hudson United and JeffBanks:
o closing share price on June 25, 1999 as a percentage of the 52-week
high share price;
o the ratio of the closing share price on June 25, 1999 to estimated
earnings for calendar years 1999 and 2000 (based on Institutional
Brokers Estimate System, or IBES, estimates);
o estimated 5-year growth rate (provided by IBES);
o the ratio of the closing share price on June 25, 1999 to estimated
earnings for calendar year 2000 (based on IBES estimates) as a multiple
of estimated 5-year growth rate (provided by IBES);
o the ratio of the closing share price on June 25, 1999 to estimated cash
earnings per share for calendar years 1999 and 2000 (based on IBES
estimates);
o the ratio of the closing share price on June 25, 1999 to tangible book
value;
o the ratio of the tangible common equity to tangible assets;
o the return on average assets for last 12 months; and
o the return on average common equity for last 12 months.
<PAGE>
The results of these analyses are summarized as follows:
<TABLE>
<CAPTION>
Northeastern Large-
Hudson Regional Banks Market Peers Cap Banks
United* JeffBanks (Median)* (Median) (Median)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
o June 25, 1999 Closing 96% 81% 85% 70% 84%
Share Price as a Percentage of
52-Week High Share Price
o Closing Share Price on 13.9x 15.6x 15.7x 13.2x 14.3x
June 25, 1999 to IBES
Estimated Earnings for
Calendar Year 1999
o Closing Share Price on 12.4x 14.1x 14.7x 12.1x 13.1x
June 25, 1999 to IBES
Estimated Earnings for
Calendar Year 2000
o IBES Estimated 5-Year 10.0% 9.8% 10.5% 13.0% 10.0%
Growth Rate
o Closing Share Price on 1.2x 1.4x 1.4x 0.8x 1.2x
June 25, 1999 to IBES
Estimated Earnings for
Calendar Year 2000 as a
Multiple of IBES Estimated
5-year Growth Rate
o Closing Share Price on 12.4x 15.3x 14.6x 12.6x 13.1x
June 25, 1999 to IBES
Estimated Cash Earnings Per
Share for Calendar Year 1999
o Closing Share Price on 11.2x 13.9x 13.3x 11.9x 12.1x
June 25, 1999 to IBES
Estimated Cash Earnings Per
Share for Calendar Year 2000
o Ratio of Closing Share 4.0x 2.2x 3.0x 1.7x 3.9x
Price on June 25, 1999 to
Tangible Book Value
o Ratio of Tangible Common 4.9% 7.6% 7.8% 6.6% 5.8%
Equity to Tangible Assets
o Return on Average Assets 1.13% 0.90% 1.22% 0.75% 1.38%
for Last 12 Months
o Return on Average Common 15.1% 11.5% 15.2% 10.6% 18.3%
Equity for Last 12 Months
</TABLE>
* Last 12 months net income for Hudson United and UST Corporation is
adjusted for restructuring and merger related expenses.
(5) Contribution Analysis. Goldman Sachs reviewed certain historical
and estimated future financial information for Hudson United and JeffBanks. The
estimated year 2000 net income information for Hudson United was derived from
estimates published by IBES. The analyses indicated the following contributions
by Hudson United and JeffBanks (dollar figures are given in billions):
<PAGE>
<TABLE>
<CAPTION>
Hudson United JeffBanks Total ($)
- ------------------------------------------------------------------------------------------------------------
$ % $ %
<S> <C> <C> <C> <C> <C>
Proposed Ownership 79.4% 20.6%
Market Capitalization (June 25, 1999) $1.4 83.0% $0.3 17.0% $1.7
Assets $7.0 80.7% $1.7 19.3% $8.7
Loans $3.4 73.0% $1.3 27.0% $4.7
Deposits $4.9 79.8% $1.2 20.2% $6.2
Common Equity $0.4 76.3% $0.1 23.7% $0.6
Tangible Common Equity $0.3 72.6% $0.1 27.4% $0.5
1999 Managements Estimated Net Income of $0.103 85.4% $0.018 14.6% $0.120
Combined Company
1999 IBES Estimated Net Income of Combined $0.100 85.0% $0.018 15.0% $0.118
Company
2000 Management (JeffBanks) and IBES (Hudson $0.112 84.0% $0.021 16.0% $0.134
United) Estimated Net Income of Combined
Company
2000 IBES Estimated Net Income of Combined $0.112 84.7% $0.020 15.3% $0.133
Company
</TABLE>
(6) Historical Forward Price/Earnings Analysis. For each trading day in
the two-year period ended June 25, 1999, Goldman Sachs calculated the ratio of
the closing price of Hudson United common stock and the closing price of
JeffBanks common stock to IBES estimated one-year forward earnings per share and
IBES estimated two-year forward earnings per share.
(7) Pro Forma Merger Analysis. Goldman Sachs prepared pro forma
analyses of the financial impact of the merger to Hudson United shareholders.
Goldman Sachs compared the year 2000 estimated earnings per share of Hudson
United common stock on a pro forma basis for the acquisition of Southern Jersey,
as provided by Hudson United's management, to the year 2000 estimated earnings
per share of the common stock of the combined company on a pro forma basis.
Based on such analysis, the merger would be accretive to shareholders of Hudson
United on an earnings per share basis in the year 2000.
(8) Selected Transaction Analysis. Goldman Sachs compared certain
information for 97 selected U.S. bank and thrift merger transactions consummated
in the years 1995-1999, with announced deal values between $250 million and
$1.25 billion, to similar information for the proposed merger, including:
o the announced deal price as a multiple of book value;
o the announced deal price as a multiple of tangible book value;
o the announced deal price as a multiple of adjusted book value;
o the announced deal price as a multiple of last 12 months earnings per
share;
o the announced deal price as a multiple of 1999 estimated earnings per
share (estimated by IBES);
o the announced deal price as a multiple of 2000 estimated earnings per
share (estimated by IBES);
o the premium of the announced deal price over core deposits of the
acquired company; and
o the premium of the announced deal price over the closing market value
of the acquired company.
The results of the analyses are summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
Hudson (10 mergers) (31 mergers) (24 mergers) (14 mergers) (18 mergers)
United ------------ ------------ ------------ ------------ ------------
/JeffBanks Mean Median Mean Median Mean Median Mean Median Mean Median
---------- ---- ------ ---- ------ ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
o Announced Deal 2.8x 3.3x 3.2x 3.0x 3.1x 2.4x 2.3x 2.0x 2.0x 1.6x 1.5x
Price as a
Multiple of Book
Value
o Announced Deal 2.9x 3.6x 3.4x 3.4x 3.5x 2.5x 2.3x 2.1x 2.0x 1.7x 1.6x
Price as a
Multiple of
Tangible Book Value
o Announced Deal 3.4x 4.9x 5.0x 4.4x 4.4x 3.3x 3.1x 2.6x 2.4x 2.0x 1.8x
Price as a
Multiple of
Adjusted Book Value
o Announced Deal 25.9x 23.8x 24.1x 26.5x 27.2x 23.0x 21.1x 17.6x 18.1x 16.2x 14.6x
Price as a
Multiple of Last
12 Months Earnings
Per Share
o Announced Deal 19.7x* 20.1x 20.3x 24.1x 24.3x -- -- -- -- -- --
Price as a
Multiple of 1999
IBES Estimated
Earnings Per Share
o Announced Deal 17.8x** 18.1x 19.1x 21.6x 21.7x -- -- -- -- -- --
Price as a
Multiple of 2000
IBES Estimated
Earnings Per Share
o Premium to 21.6% 32.9% 34.6% 30.9% 29.8% 24.7% 22.1% 13.5% 14.1% 9.1% 7.6%
Core Deposits
o Premium to 26.3% 33.1% 22.7% 37.8% 29.0% 21.3% 24.8% 20.5% 21.6% 16.8% 15.2%
Market
</TABLE>
* Management estimate - 21.0x.
** Management estimate - 18.2x.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible of partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Hudson United or JeffBanks or the contemplated merger.
The analyses were prepared solely for purposes of providing an opinion
to the Hudson United board of directors as to the fairness from a financial
point of view to Hudson United of the exchange ratio. The analyses do not
purport to be appraisals or necessarily reflect the prices at which businesses
or securities actually may be sold. Analyses based upon forecasts of future
results are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses. Because
such analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisors, none of Hudson United, JeffBanks, Goldman Sachs or any other person
assumes responsibility if future results are materially different from those
forecast.
The foregoing summary does not purport to be a complete description of
the analyses performed by Goldman Sachs.
Goldman Sachs, as part of its investment banking business, is
continually engaged in the valuation of 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. Goldman
Sachs is familiar with Hudson United having provided certain financial advice
from time to time, including having provided Hudson United a fairness opinion in
connection with the acquisition of Lafayette American Bank and Trust Company in
July 1996. Goldman Sachs provides a full range of financial advisory and
securities services and, in the course of its normal trading activities, may
from time to time effect transactions and hold securities, including derivative
securities, of Hudson United or JeffBanks for its own account and for the
accounts of customers. As noted above, Goldman Sachs did not act as financial
advisor to Hudson United in connection with the merger.
Pursuant to a letter agreement dated June 25, 1999, Hudson United
engaged Goldman Sachs to conduct a study to enable Goldman Sachs to render the
fairness opinion described above. Pursuant to the terms of this letter
agreement, Hudson United agreed to pay Goldman Sachs a transaction fee of
$425,000, which was paid in cash at the time of delivery of the opinion. Hudson
United also agreed to reimburse Goldman Sachs for their reasonable out-of-pocket
expenses, including attorneys' fees, and to indemnify Goldman Sachs against
certain liabilities, including certain liabilities under the federal securities
laws.
Opinion of Keefe, Bruyette & Woods, Inc.
JeffBanks engaged Keefe, Bruyette & Woods, Inc. to act as its exclusive
financial advisor in connection with the merger. KBW agreed to assist JeffBanks
in analyzing, structuring, negotiating and effecting a transaction with Hudson
United. JeffBanks selected KBW because it is a nationally recognized
investment-banking firm with substantial experience in transactions similar to
the merger and is familiar with JeffBanks and its business. As part of its
investment banking business, KBW is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions.
As part of its engagement, representatives of KBW attended the meeting
of JeffBanks board of directors on June 28, 1999 at which the JeffBanks Board
considered and approved the merger agreement. At the June 28, 1999 meeting, KBW
rendered an oral opinion (subsequently confirmed in writing) that, as of that
date, the exchange ratio was fair to JeffBanks and its shareholders from a
financial point of view. That opinion was reconfirmed in writing as of the date
of this joint proxy statement-prospectus.
The full text of KBW's updated written opinion is attached as Appendix
D to this joint proxy statement-prospectus and is incorporated in it by
reference. JeffBanks shareholders are urged to read the opinion in its entirety
for a description of the procedures followed, assumptions made, matters
considered, and qualifications and limitations on the review undertaken by KBW.
KBW's opinion is directed to the JeffBanks Board and addresses only the
exchange ratio. It does not address the underlying business decision to proceed
with the merger and does not constitute a recommendation to any JeffBanks
shareholder as to how the shareholder should vote at JeffBanks' meeting with
respect to the merger or any matter related thereto.
In rendering its opinion, KBW:
o reviewed, among other things,
o the merger agreement,
o annual reports to shareholders and annual reports on Form 10-K of
Hudson United,
o annual reports to shareholders and annual reports on Form 10-K of
JeffBanks,
o quarterly reports on Form 10-Q of Hudson United Bancorp,
o quarterly reports on Form 10-Q of JeffBanks, and
o certain internal financial analyses and forecasts for JeffBanks
and Hudson United prepared by management;
o held discussions with members of senior management of Hudson United and
JeffBanks regarding
o past and current business operations,
o regulatory relationships,
o financial condition, and
o future prospects of the respective companies;
o compared certain financial and stock market information for Hudson
United and JeffBanks with similar information for certain other
companies with publicly traded securities;
o reviewed the financial terms of certain recent business combinations in
the banking industry; and
o performed other studies and analyses that it considered appropriate.
The projections furnished to KBW and used by it in certain of its
analyses were prepared by the senior management of JeffBanks. JeffBanks does not
publicly disclose internal management projections of the type provided to KBW in
connection with its review of the merger. As a result, such projections were not
prepared with a view towards public disclosure. The projections were based on
numerous variables and assumptions which are inherently uncertain, including
factors related to general economic and competitive conditions. Accordingly,
actual results could vary significantly from those set forth in the projections.
The following is a summary of the material analyses presented by KBW to
the JeffBanks Board on June 28, 1999 in connection with its June 28, 1999
opinion:
Transaction Summary. KBW calculated the merger consideration to be paid
pursuant to the exchange ratio as a multiple of JeffBanks' book value, 1998
actual (excluding non-recurring charges and gains) and 1999 estimated earnings.
This computation assumed the estimates of JeffBanks' earnings per share of $1.47
in 1998 (excluding non-recurring charges and gains) and $1.60 in 1999, and an
exchange ratio of 0.95 Hudson United share for each JeffBanks share. Based on
those assumptions, this analysis indicated that JeffBanks shareholders would
receive shares of Hudson United common stock worth $33.01 for each share of
JeffBanks common stock held, and that this amount would represent a multiple of
2.81 times book value per share and 20.63 times estimated 1999 earnings per
share.
Discounted Cash Flow Analysis. KBW estimated the present value of
future cash flows that would accrue to a holder of a share of JeffBanks common
stock assuming that the shareholder held the stock for five years and then sold
it. The analysis was based on earnings forecasts prepared by management on a
stand-alone, independent basis for 1999 and annual net income growth rates from
6.0% to 14.0% for the years 2000 through 2003. A 39.0% dividend payout ratio was
assumed for JeffBanks through the year 2003. JeffBanks' value in the event of a
sale was determined by using terminal P/E multiples from 20.0 times to 25.0
times. The terminal value and the dividends received were discounted at a rate
of 12.0%. This rate was selected because, in KBW's experience, it represents the
risk-adjusted rates of return that investors in securities such as the common
stock of JeffBanks would require. On the basis of these assumptions, KBW
calculated a range of present values ranging from $25.43 to $41.22. These values
were compared to the $33.01 offer from Hudson United.
KBW stated that the discounted cash flow present value analysis is a
widely used valuation methodology but noted that it relies on numerous
assumptions, including asset and earnings growth rates, terminal values and
discount rates. The analysis did not purport to be indicative of the actual
values or expected values of JeffBanks common stock.
Selected Transaction Analysis. KBW reviewed certain financial data
related to comparable bank transactions which were nationwide bank transactions
from June 1, 1998 to June 27, 1999 with transaction values between $150 million
and $1 billion.
KBW compared multiples of price to various factors for the Hudson
United-JeffBanks, Inc. merger to the same average multiples for this comparable
group's mergers at the time those mergers were announced. The results were as
follows:
<TABLE>
<CAPTION>
Multiple of Price to Factor
Factor Considered Comparable Group Average Hudson United-JeffBanks Merger
----------------- ------------------------ ------------------------------
<S> <C> <C>
Recurring Trailing 12 Months Earnings 24.6x 22.5x
Book Value 3.0x 2.8x
Tangible Book Value 3.4x 2.9x
</TABLE>
<PAGE>
KBW then compared multiples of price to various factors for the Hudson
United-JeffBanks merger to the same average multiples for this comparable
group's mergers adjusted to reflect changes in the buyers' stock prices. The
results were as follows:
<TABLE>
<CAPTION>
Multiple of Price to Factor
Factor Considered Comparable Group Average Hudson United-JeffBanks Merger
----------------- ------------------------ ------------------------------
<S> <C> <C>
Recurring Trailing 12 Months Earnings 22.5x 22.5x
Stated Book Value 2.7x 2.8x
Estimated Tangible Book Value 3.1x 2.9x
</TABLE>
No company or transaction used as a comparison in the above analysis is
identical to Hudson United, JeffBanks or the merger. Accordingly, an analysis of
these results 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.
Selected Peer Group Analysis. KBW compared the financial performance
and market performance of Hudson United to those of a group of comparable
holding companies. The comparisons were based on:
o various financial measures
o earnings performance,
o operating efficiency,
o capital adequacy and
o asset quality and
o various measures of market performance, including
o market/book values,
o price to earnings and
o dividend yields.
To perform this analysis, KBW used the financial information as of and for the
quarter ended March 31, 1999 and market price information as of June 25, 1999.
The companies in the peer group were selected U.S. regional banks that had total
market capitalization ranging from $1.2 to $6.1 billion.
KBW's analysis showed the following concerning Hudson United's
financial performance:
<TABLE>
<CAPTION>
Performance Measure Hudson United Peer Group Averages
------------------- ------------- -------------------
<S> <C> <C>
Return on Equity, annualized 23.1% 18.86%
Return on Assets, annualized 1.47% 1.51%
Net Interest Margin, annualized 4.02% 4.23%
Efficiency Ratio, annualized 50.16% 53.25%
Tangible Equity / Assets 4.92% 6.94%
Non-Performing Assets to Total Loans and Other
Real Estate Owned .59% .49%
Loan Loss Reserve to Average Loans 284% 413%
<CAPTION>
KBW's analysis showed the following concerning Hudson United's market
performance:
Performance Measure Hudson United Peer Group Averages
------------------- ------------- -------------------
<S> <C> <C>
Price to Earnings Multiple, based on 1999 14.13x 14.88x
estimated earnings
Price to Earnings Multiple, based on 2000 12.32x 13.48x
estimated earnings
Price to Book Multiples 3.21x 2.83x
Price to Tangible Book Multiples 3.87x 3.10x
Dividend Yield 2.88% 2.98%
</TABLE>
For purposes of the above calculations, all earnings estimates are based upon
the KBW estimates for Hudson United.
Contribution Analysis. KBW analyzed the relative contribution of each
of Hudson United and JeffBanks to certain pro forma balance sheet and income
statement items of the combined entity. The contribution analysis showed:
JeffBanks Contribution To:
Combined Common Equity 23.7%
Annualized Recurring Net Income
without Cost Savings 13.7%
Combined Total Assets 19.3%
JeffBanks Estimated Pro Forma Ownership 20.9%
KBW compared the relative contribution of the balance sheet and income statement
items with the estimated pro forma ownership for JeffBanks shareholders based on
an exchange ratio of 0.95.
Other Analyses. KBW reviewed the relative financial and market
performance of JeffBanks and Hudson United compared to a variety of relevant
industry peer groups and indices. KBW also reviewed earnings estimates, balance
sheet composition, historical stock performance and other financial data for
Hudson United.
In connection with its opinion dated as of the date of this joint proxy
statement-prospectus, KBW performed procedures to update, as necessary, certain
of the analyses described above. KBW reviewed the assumptions on which the
analyses described above were based and the factors considered in connection
with them. KBW did not perform any analyses in addition to those described above
in updating its June 28, 1999 opinion.
KBW has not independently verified the information described above and
for purposes of its opinion has assumed the accuracy, completeness and fairness
of the information. With respect to information included in the joint prospectus
of JeffBanks and Hudson United, KBW has assumed that such information reflects
the best currently available estimates and judgments of the managements of
JeffBanks and Hudson United, respectively, as to the likely future financial
performance of JeffBanks and Hudson United. KBW also assumed, without
independent verification, that the aggregate allowances for loan losses for
Hudson United and JeffBanks are adequate to cover those losses. KBW did not make
or obtain any evaluations or appraisals of the property of Hudson United or
JeffBanks, and did not examine any individual credit files.
The JeffBanks Board has retained KBW as an independent contractor to
act as financial advisor to JeffBanks regarding the merger. As part of its
investment banking business, KBW 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, JeffBanks and Hudson United. 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 JeffBanks and Hudson United for KBW's own account and for
the accounts of its customers.
JeffBanks and KBW have entered into an agreement relating to the
services to be provided by KBW in connection with the merger. JeffBanks has
agreed to pay KBW, at the time of closing, a cash fee of $3.2 million. Pursuant
to the KBW engagement agreement, JeffBanks also agreed to reimburse KBW for
reasonable out-of-pocket expenses and disbursements incurred in connection with
its retention and to indemnify it against certain liabilities, including
liabilities under the federal securities laws.
Resale Considerations Regarding Hudson United Common Stock
The shares of Hudson United common stock that will be issued if the
merger is consummated have been registered under the Securities Act of 1933.
These registered shares will be freely transferable, except for shares received
by persons, including directors and executive officers of JeffBanks, who may be
deemed to be "affiliates" of JeffBanks under Rule 145 promulgated under the
Securities Act. An "affiliate" of an issuer is generally a person who "controls"
the issuer. Directors, executive officers and 10% shareholders may be deemed to
control the issuer. Affiliates may not sell their shares of Hudson United common
stock acquired pursuant to the merger, except pursuant to an effective
registration statement under the Securities Act, or in compliance with Rule 145
or another applicable exemption from the registration requirements of the
Securities Act.
Persons who may be deemed "affiliates" of JeffBanks have delivered
letters to Hudson United in which they have agreed to certain restrictions on
their ability to transfer, whether by sale or otherwise, any JeffBanks common
stock owned by them and any Hudson United common stock acquired by them in the
merger. Hudson United required these restrictions in order to comply with the
accounting rules governing a pooling-of-interests, and to comply with Rule 145
under the Securities Act. These persons have agreed not to transfer the shares
during a period which begins 30 days before the merger is completed and ends
when Hudson United publishes financial results covering at least 30 days of
post-merger combined operations of Hudson United and JeffBanks. Those persons
have also agreed not to transfer their shares before that restricted period
without giving Hudson United advance notice and an opportunity to object if the
transfer would interfere with pooling-of-interests accounting for the merger.
These persons have also agreed to refrain from transferring Hudson United common
stock acquired by them in the merger, except in compliance with certain
restrictions imposed by Rule 145. Certificates representing the shares of Hudson
United common stock acquired by these persons in the merger will bear a legend
stating that the shares are restricted in accordance with the letter signed by
them and may not be transferred except in compliance with such restrictions.
Persons who may be deemed "affiliates" of Hudson United have also
delivered letters to Hudson United in which they have agreed not to transfer
Hudson United common stock beneficially owned by them in violation of the
pooling-of-interests restrictions set forth above with respect to JeffBanks.
Conditions to the Merger
The obligation of each party to consummate the merger is subject to
satisfaction or waiver of certain conditions, including:
o approval of the merger agreement by the shareholders of JeffBanks and
Hudson United;
o receipt of all necessary consents, approvals and authorizations from
federal and state government authorities;
o absence of any litigation that would restrain or prohibit the
consummation of the merger;
o receipt of a letter from Hudson United's independent accountants
regarding qualification of the merger for pooling-of-interests
accounting treatment; and
o receipt of another opinion of Pitney, Hardin, Kipp & Szuch at closing
regarding the tax-free nature of the merger. If this condition is
waived, i.e., if the merger is not necessarily tax-free but Hudson
United and JeffBanks wish to consummate it anyway, JeffBanks will
resolicit its shareholders' vote on the merger.
The obligation of Hudson United to consummate the merger is also
conditioned on, among other things:
o continued accuracy in all materials respects of the representations and
warranties of JeffBanks contained in the merger agreement; and
o performance by JeffBanks, in all material respects, of its obligations
under the merger agreement.
The obligation of JeffBanks to consummate the merger is also
conditioned on, among other things:
o continued accuracy in all materials respects of the representations and
warranties of Hudson United contained in the merger agreement; and
o performance by Hudson United, in all material respects, of its
obligations under the merger agreement.
Conduct of Business Pending the Merger
The merger agreement requires JeffBanks to conduct its business until
the merger takes effect only in the ordinary course of business and consistent
with prudent business practices, except as permitted under the merger agreement
or with the written consent of Hudson United. Under the merger agreement,
JeffBanks has agreed not to take certain actions without the prior written
consent of Hudson United or unless permitted by the merger agreement, including,
among other things, the following:
o change any provision of its charter, bylaws or similar governing
documents;
o issue new stock, grant an option, or declare, set aside or pay any
dividend other than JeffBanks' regular quarterly cash dividends up to
$0.62 per share;
o grant anyone severance or termination pay or enter into or amend any
employment agreement;
o adopt any new employee benefit plan, or award any increase in
compensation or benefits;
o file any applications or make any contracts regarding branching or site
location or relocation;
o agree to acquire any business or entity (other than to foreclose on
collateral for a defaulted loan);
o make any material change in its accounting methods or practices not
required by generally accepted accounting principles;
o take any action that would cause any of its representations or
warranties in the merger agreement to be materially untrue or incorrect
at the time the merger becomes effective; and
o make or commit to make any new loan in excess of $5,000,000, except for
certain loans and residential mortgage loans made in the ordinary
course of business.
Under the merger agreement, JeffBanks cannot encourage or solicit or
hold discussions or negotiations with, or provide any information to, anyone
other than Hudson United concerning any (1) merger, (2) sale of stock, (3) sale
of substantial assets or liabilities outside the ordinary course of business or
(4) similar transactions. However, JeffBanks may enter into discussions or
negotiations or provide any information in connection with an unsolicited
possible transaction of this sort if the JeffBanks Board, after consulting with
counsel, determines in the exercise of its fiduciary responsibilities that it
should take such actions. JeffBanks has agreed to promptly communicate to Hudson
United the terms of any proposal it may receive with respect to any such
acquisition transaction. This restriction, along with the option described in
the following section, may deter other potential acquirors of JeffBanks.
Stock Option to Hudson United for JeffBanks Shares
As a condition to Hudson United entering into the merger agreement,
Hudson United required that JeffBanks grant Hudson United a stock option
designed to deter other companies from attempting to acquire control of
JeffBanks. The option gives Hudson United the right to purchase for $26.00 per
share up to 1,212,706 shares of JeffBanks common stock, representing
approximately 11.5% of the outstanding JeffBanks shares on the date the option
was granted. The option is exercisable only if certain specific triggering
events occur and the merger does not occur. Hudson United has no right to vote
the shares covered by the option before its exercise.
Hudson United could recognize a gain if it exercises the option and
resells the shares it acquires for more than the exercise price. The option
agreement also gives Hudson United the right, under certain specified
circumstances, to require JeffBanks to repurchase the option from Hudson United
(or repurchase the shares acquired by Hudson United upon exercise of the
option). The option may deter other potential acquirors of JeffBanks, because it
would probably increase the cost of acquiring all the shares of JeffBanks common
stock. Hudson United's exercise of the option could also make
pooling-of-interests accounting treatment unavailable to another potential
acquiror. The agreement granting the option appears as Appendix B to this
document.
Employee Matters
After the merger is completed, Hudson United will honor JeffBanks'
existing employment agreements. Before the end of September 1999, JeffBanks and
Hudson United will use their best efforts to inform JeffBanks' employees of the
likelihood of their continuing employment with Hudson United. Any JeffBanks'
employee whose employment is discontinued by Hudson United, other than for
cause, within six months of the merger will receive a severance payment of one
week's pay for each full year of service to JeffBanks, with a minimum of two
weeks' and a maximum of 26 weeks' severance. In addition, Hudson United will pay
the cost of out-placement services for these employees, up to a total of
$50,000. JeffBanks' employees who become employees of Hudson United will be
entitled to participate in Hudson United's employee benefit plans and, for
participation and vesting purposes, will receive credit for their years of
service to JeffBanks.
Representations, Warranties and Covenants
The merger agreement contains customary mutual representations and
warranties, as well as covenants, relating to, among other things:
o corporate organization and similar corporate matters;
o authorization, execution and enforceability of the merger agreement;
o the accuracy of information contained in each party's filings with the
SEC;
o the accuracy of information supplied by each party in creating this
document;
o compliance with applicable laws;
o the absence of material litigation;
o certain bank regulatory matters;
o the absence of certain material changes or events since December 31,
1998;
o the adequacy of loan loss reserves; and
o each party's preparations to have its data processing systems be Year
2000 compliant.
Regulatory Approvals
Completion of the merger is subject to obtaining all the necessary
regulatory approvals. The Jefferson Bank and Jefferson Bank of New Jersey
mergers require approvals from the FDIC, the New Jersey Department of Banking
and Insurance and the Pennsylvania Department of Banking. Approval by any and
all bank regulators, however, does not constitute an endorsement of the merger
or a determination that the terms of the merger are fair to JeffBanks
shareholders or Hudson United shareholders.
Hudson United filed applications for approval with the FDIC on July 12,
1999 and with the New Jersey Department of Banking and Insurance and with the
Pennsylvania Department of Banking on July 13, 1999. Hudson United also
corresponded with the Federal Reserve Board on July 13, 1999, to obtain from the
Federal Reserve Board a confirmation that it will waive its approval requirement
to complete the merger based upon the FDIC approval. A waiver letter or an
approval from the Federal Reserve Board is necessary before the merger can be
completed. While Hudson United and JeffBanks anticipate receiving the necessary
regulatory approvals, we can give no assurance that they will be granted, or
that they will be granted on a timely basis without conditions unacceptable to
Hudson United or JeffBanks.
Management and Operations After the Merger
As a result of the merger, JeffBanks will be merged with Hudson United,
with Hudson United as the surviving entity. Immediately following the merger,
Jefferson Bank and Jefferson Bank of New Jersey will both be merged with and
into Hudson United Bank, with Hudson United Bank as the surviving entity. Hudson
United Bank will continue to operate as a wholly-owned subsidiary of Hudson
United.
Hudson United expects that, for a period of at least three years after
the merger, Hudson United Bank will operate a separate division to be known as
the Jefferson Bank Division of Hudson United Bank. The division will be
responsible for the former business banking operations of JeffBanks' subsidiary
banks and the southern New Jersey branches of Hudson United Bank. The division
will also be responsible for the residential mortgage lending and consumer
lending operations of Hudson United Bank. Hudson United expects to appoint Betsy
Z. Cohen as Chairperson and Chief Executive Officer of the new division, and
Robert B. Goldstein as Chief Operating Officer of the new division. Mrs. Cohen
is currently Chairperson and Chief Executive Officer of JeffBanks, and Mr.
Goldstein is currently President and Chief Operating Officer of JeffBanks and of
Jefferson Bank. All current JeffBanks directors will be invited to serve as
advisory directors for the new division.
Hudson United has agreed to appoint Mrs. Cohen and William H. Lamb as
directors of Hudson United when the merger occurs. Mr. Lamb is currently a
JeffBanks director. At Hudson United's next annual shareholders' meeting, Mrs.
Cohen will be nominated to serve for a three-year term. Hudson United has also
agreed to appoint three persons designated by JeffBanks and reasonably
acceptable to Hudson United as directors of Hudson United Bank when the merger
occurs.
Exchange of Certificates
When the merger takes effect, no one will any longer have any rights as
a JeffBanks shareholder. Certificates that represented shares of JeffBanks
common stock automatically will represent the shares of Hudson United common
stock based on the exchange ratio.
Promptly after the merger takes effect, Hudson United's exchange agent
will send written instructions and a letter of transmittal to each JeffBanks
shareholder, indicating how to exchange JeffBanks stock certificates for the
Hudson United stock certificates. JeffBanks shareholders should not send in
their stock certificates until they receive instructions from the exchange
agent.
Each share of Hudson United common stock issued in exchange for
JeffBanks common stock will be deemed to have been issued at the time the merger
becomes effective. Thus, JeffBanks shareholders who receive Hudson United common
stock in the merger will be entitled to receive any dividend or other
distribution which may be payable to holders of record of Hudson United common
stock as of any date on or after the time the merger becomes effective. However,
no dividend or other distribution will actually be paid with respect to any
shares of Hudson United common stock until the certificates formerly
representing shares of JeffBanks common stock have been surrendered, at which
time Hudson United will pay any accrued dividends and other distributions on
such shares without interest. See "Consideration; Exchange Ratio; Cash Instead
of Fractional Shares" on page 30.
JeffBanks shareholders, promptly after they surrender their JeffBanks
stock certificates to the exchange agent, will receive a certificate
representing the full number of shares of Hudson United common stock into which
their shares of JeffBanks common stock have been converted together with a check
for the amount of the fractional share interest, if any.
Amendments
Hudson United and JeffBanks may amend the merger agreement by mutual
written consent at any time prior to the merger. However, an amendment which
reduces the amount or changes the form of consideration to be received by
JeffBanks shareholders cannot be made following adoption of the merger agreement
by those shareholders without their approval.
Terminating the Merger Agreement
JeffBanks and Hudson United may terminate the merger agreement at any
time by mutual consent.
Either JeffBanks or Hudson United may terminate the merger agreement
for certain reasons, including the following:
o the merger has not been completed by April 30, 2000;
o JeffBanks or Hudson United shareholders fail to approve the merger
agreement at their meetings; or
o a regulatory approval needed to complete the merger has been denied or
withdrawn.
Hudson United may terminate the merger agreement if:
o there has been a material adverse change in JeffBanks' business,
operations, assets or financial condition since December 31, 1998;
o JeffBanks materially breaches the merger agreement; or
o a regulatory approval needed to complete the merger is given with
conditions which materially impair the value of JeffBanks to Hudson
United.
JeffBanks may terminate the merger agreement if:
o there has been a material adverse change in Hudson United's business,
operations, assets or financial condition since December 31, 1998
(which excludes the effects of any pending acquisition by Hudson
United);
o Hudson United materially breaches the merger agreement; or
o the JeffBanks board of directors approves another acquisition
transaction after determining, upon the advice of counsel, that the
approval was necessary in the exercise of the board's fiduciary
obligations (which would cause a triggering event under the stock
option granted to Hudson United).
Upon a termination of the merger agreement, the merger and other
transactions contemplated by the merger agreement will be abandoned without
further action by any party and each party will bear its own expenses.
Special Termination Provisions
The merger agreement also contains provisions designed to let the
JeffBanks Board terminate the agreement upon a "Termination Event," which is
when both of the following occurs:
o the price of Hudson United common stock falls by more than 30% from its
level on June 25, 1999, which was $34.6563,
and
o the percentage drop in the price of Hudson United common stock is at
least 20% more than the percentage drop in an index of 17 comparable
bank stocks.
For example, if the bank stock index falls by 12%, Hudson United common stock
would have to fall by more than 32% for the second test to be met.
Hudson United may override the termination by increasing the exchange
ratio to a level that would give JeffBanks shareholders consideration with the
minimum value they could have received without triggering the termination
provisions.
It is not possible to know whether a Termination Event will occur
before the JeffBanks shareholders vote at the JeffBanks meeting. We cannot
assure you either that the JeffBanks Board would exercise its right to terminate
the merger agreement if a Termination Event occurs, or that Hudson United would
increase the exchange ratio to override any such termination by JeffBanks.
The JeffBanks Board has not determined if it would exercise its right
to terminate the merger agreement upon a Termination Event. Similarly, the
Hudson United Board has not determined if it would increase the exchange ratio
to override any termination by JeffBanks upon a Termination Event. In making
these determinations, each board would, consistent with its fiduciary duties,
take into account all relevant facts and circumstances that exist at the time
and would consult with its financial advisors and legal counsel. By approving
the merger agreement, the shareholders of JeffBanks will give the JeffBanks
Board the power, consistent with its fiduciary duties, to complete the merger
following a Termination Event without any further action by, or resolicitation
of, the JeffBanks shareholders, regardless of whether the exchange ratio is
increased. By approving the merger agreement, the shareholders of Hudson United
will give the Hudson United Board the power, consistent with its fiduciary
duties, to increase the exchange ratio and complete the merger following a
Termination Event and a JeffBanks termination without any further action by, or
resolicitation of, the Hudson United shareholders.
The operation of these special termination provisions can be explained
using the following definitions:
"Determination Date"-- the fifth business day prior to the scheduled
closing date for the merger. Unless the parties agree on a different date,
Hudson United will schedule the closing date in a notice to JeffBanks. Hudson
United must schedule the closing on a date which is at least seven but not more
than ten days after all material conditions to closing the merger have been met.
"Determination Price" -- the median of the closing prices for Hudson
United common stock for the ten trading days ending with the Determination Date.
The median will be determined by discarding the four highest and four lowest
closing prices for Hudson United common stock during the ten-day pricing period
and then averaging the remaining two closing prices.
"Hudson United Average Starting Date Price" -- the average of high and
low sale price of Hudson United common stock on June 25, 1999 (i.e., $34.6563),
adjusted to reflect any stock split, stock dividend or similar event affecting
Hudson United common stock through the closing of the merger.
"Hudson United Floor Price" -- 30% less than the Hudson United Average
Starting Date Price (i.e., $24.2594).
"Hudson United Ratio" -- the number obtained by dividing the
Determination Price by the Hudson United Average Starting Date Price.
"Index Price" -- the number obtained using the index of 17 financial
institutions set forth on Exhibit A to the merger agreement. As noted on Exhibit
A to the merger agreement, a financial institution will be removed from the
index (and treated as though it was never included in the index) if the common
stock of that institution ceases to be publicly traded or there is a public
announcement of a proposal for the institution to be acquired or for the
institution to acquire another company or companies in transactions with a value
exceeding 25% of the acquirer's market capitalization.
"Index Ratio" -- the number obtained by dividing the Index Price on the
Determination Date by the Index Price on June 25, 1999, and then subtracting
0.20.
Using these definitions, there is a "Termination Event" only if both of
the following are true:
o The Determination Price is less than the Hudson United Floor Price
and
o The Hudson United Ratio is less than the Index Ratio.
Under the merger agreement, JeffBanks has three business days following
the Determination Date to exercise its termination rights based on a Termination
Event. Hudson United then has two business days to override the termination, if
it so chooses, by increasing the exchange ratio so that it equals the lesser of
the following two amounts:
o a number (rounded to four decimals) equal to a fraction in which the
numerator is the Hudson United Floor Price multiplied by the exchange
ratio then in effect and the denominator is the Determination Price,
and
o a number (rounded to four decimals) equal to a fraction in which the
numerator is the Index Ratio multiplied by the exchange ratio then in
effect and the denominator is the Hudson United Ratio.
Accounting Treatment of the Merger
Hudson United expects to account for the merger under the pooling of
interests method of accounting in accordance with generally accepted accounting
principles. Each party's obligation to consummate the merger is conditioned upon
Hudson United's receiving a letter from its independent public accountants that
the merger qualifies for such accounting treatment.
Under pooling-of-interests accounting treatment, as of the time the
merger becomes effective the assets and liabilities of JeffBanks would be added
to those of Hudson United at their recorded book values and the stockholders'
equity accounts of Hudson United and JeffBanks would be combined on Hudson
United's consolidated balance sheet. On a pooling-of-interests accounting basis,
income and other financial statements of Hudson United issued after the merger
is completed would be restated retroactively to reflect the consolidated
combined financial position and results of operations of Hudson United and
JeffBanks as if the merger had taken place before the periods covered by such
financial statements. The pro forma financial information contained in this
joint proxy statement-prospectus has been prepared using the
pooling-of-interests accounting method to account for the merger. See "Pro Forma
Financial Information" beginning on page 57.
Both the pooling-of-interests and purchase methods of accounting are
acceptable methods of recording business combinations. However, they are not
alternative choices in accounting for the same transaction. If all the criteria
for recording a transaction as a pooling are met, the transaction must be so
recorded. The method of accounting for a business combination can have a
significant effect on the reported earnings and financial condition of a
company.
Federal Income Tax Consequences
The following is a discussion of the material federal income tax
consequences of the merger. The discussion may not apply to special situations,
such as those of any JeffBanks shareholders
o who received Hudson United common stock upon the exercise of employee
stock options or otherwise as compensation,
o that hold JeffBanks common stock as part of a "straddle" or "conversion
transaction", or
o that are insurance companies, securities dealers, financial
institutions or foreign persons.
This discussion does not address any aspects of state, local or foreign
taxation. It is based upon laws, regulations, rulings and decisions now in
effect and on proposed regulations. All of these are subject to change by
legislation, administrative action or judicial decision, and the changes could
have retroactive effects. No ruling has been or will be requested from the
Internal Revenue Service on any tax matter relating to the tax consequences of
the merger.
As an exhibit to the Registration Statement of which this joint proxy
statement-prospectus is a part, Pitney, Hardin, Kipp & Szuch, counsel to Hudson
United, has advised Hudson United and JeffBanks in an opinion dated the date of
this joint proxy statement-prospectus that:
o The merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended.
o JeffBanks will not recognize any gain or loss.
o JeffBanks shareholders will not recognize any gain or loss for federal
income tax purposes upon the exchange in the merger of shares of
JeffBanks common stock solely for Hudson United common stock, except
with respect to cash received instead of a fractional share interest in
Hudson United common stock.
o The basis of Hudson United common stock received in the merger by
JeffBanks shareholders will be the same as the basis of the shares of
JeffBanks common stock that they surrendered in exchange therefor.
o The holding period of Hudson United common stock will include the
holding period during which the shares of JeffBanks common stock
surrendered in exchange were held by the JeffBanks shareholder,
provided those shares of JeffBanks common stock were held as capital
assets.
o Cash received by a holder of JeffBanks common stock instead of a
fractional share interest in Hudson United common stock will be treated
as received in exchange for such fractional share interest. If the
fractional share would have constituted a capital asset in hands of
that holder, the holder generally should recognize a capital gain or
loss equal to the amount of cash received, less the portion of the
adjusted tax basis in JeffBanks common stock allocable to the
fractional share interest.
Consummation of the merger is conditioned, among other things, on
receipt by each of Hudson United and JeffBanks of an opinion of Pitney, Hardin,
Kipp & Szuch, dated the closing date of the merger, to the same effect. If this
condition is waived, i.e., if the merger is not necessarily tax-free but Hudson
United and JeffBanks wish to consummate it anyway, JeffBanks will resolicit its
shareholders' vote on the merger.
The opinions of Pitney, Hardin, Kipp & Szuch summarized above are or
will be based, among other things, on representations contained in certificates
of officers of JeffBanks and Hudson United.
Because certain tax consequences of the merger may vary depending upon
the particular circumstances of each holder of JeffBanks common stock and other
factors, each JeffBanks shareholder is urged to consult his or her own tax
advisor to determine the particular tax consequences to the shareholder of the
merger, including the application and effect of state and local income and other
tax laws.
No Dissenters' Rights
Under applicable New Jersey and Pennsylvania law, neither Hudson United
nor JeffBanks shareholders have dissenters' rights of appraisal in connection
with the merger.
<PAGE>
PRO FORMA FINANCIAL INFORMATION
Presented on the following page is a pro forma combined condensed
balance sheet of Hudson United and JeffBanks at March 31, 1999, giving effect to
the merger as if it had been consummated at such date. Also presented are the
pro forma combined condensed statements of income for the three-month period
ended March 31, 1999 and for the years ended December 31, 1998, 1997 and 1996.
The unaudited pro forma financial information is based on the historical
financial statements of Hudson United and JeffBanks after giving effect to the
merger under the pooling-of-interests method of accounting and based upon the
assumptions and adjustments contained in the accompanying notes to pro forma
combined condensed financial statements.
The unaudited pro forma financial information has been prepared by
Hudson United's management based upon the historical financial statements and
related notes thereto of Hudson United and JeffBanks, which are incorporated
herein by reference. The unaudited pro forma financial information should be
read in conjunction with those historical financial statements and notes. The
pro forma combined information does not include the effect of the pending merger
of Hudson United with Southern Jersey Bancorp, or the pending acquisition of
loans and deposits from Advest Bank or the recently completed acquisition of
Little Falls Bancorp. The historical amounts presented in future financial
statements of Hudson United for periods reported in this joint proxy
statement-prospectus will differ and in certain cases will differ materially as
a result of the effects of accounting for the merger and the pending acquisition
of Southern Jersey, when consummated, as pooling-of-interests. See "Certain
Information Regarding Hudson United - Recent Developments" on page 21.
The pro forma financial data is not necessarily indicative of the
actual financial results that would have occurred had the merger been
consummated as of the beginning of the periods for which the data is presented
and should not be construed as being representative of future periods.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Balance Sheet As of March 31, 1999 ($ in
thousands, except per share data)
Hudson United
Bancorp Pro forma Pro forma
Assets JeffBanks Adjustments Combined
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 242,368 $ 59,662 $ -- $ 302,030
Federal funds sold 8,819 23,000 -- 31,819
Securities 3,064,880 286,568 -- 3,351,448
Assets held for sale -- 16,226 -- 16,226
Loans 3,424,314 1,248,535 -- 4,672,849
Less: Allowance for loan losses (54,504) (11,930) -- (66,434)
--------------- -------------- -------------- --------------
Total Loans 3,369,810 1,236,605 -- 4,606,415
--------------- -------------- -------------- --------------
Other assets 275,253 57,125 -- 332,378
Intangibles, net of amortization 84,937 5,281 -- 90,218
=============== ============== ============== ==============
Total Assets $ 7,046,067 $ 1,684,467 $ -- $ 8,730,534
=============== ============== ============== ==============
Liabilities and Stockholders' Equity
Deposits:
Non-interest bearing $ 870,506 $ 205,528 $ -- $ 1,076,034
Interest bearing 4,061,461 1,039,084 -- 5,100,545
--------------- -------------- -------------- --------------
Total deposits 4,931,967 1,244,612 6,176,579
--------------- -------------- -------------- --------------
Borrowings 1,292,644 228,648 -- 1,521,292
Other liabilities 194,287 20,998 -- 215,285
--------------- -------------- -------------- --------------
6,418,898 1,494,258 -- 7,913,156
Subordinated debt 100,000 31,920 -- 131,920
Company-obligated mandatorily redeemable
preferred securities 100,000 25,300 -- 125,300
=============== ============== ============== ==============
Total Liabilities 6,618,898 1,551,478 -- 8,170,376
=============== ============== ============== ==============
Stockholders' Equity:
Preferred stock -- -- -- --
Common stock 72,246 10,512 7,244 90,002
Additional paid in capital 262,855 97,563 (7,244) 353,174
Retained earnings 128,030 24,359 -- 152,389
Treasury Stock (34,484) -- -- (34,484)
Employee stock awards & ESOP shares (2,243) -- -- (2,243)
Accumulated other comprehensive income 765 555 -- 1,320
--------------- -------------- -------------- --------------
Total Stockholders' Equity 427,169 132,989 -- 560,158
--------------- -------------- -------------- --------------
Total Liabilities and Stockholders' Equity $ 7,046,067 $ 1,684,467 $ -- $ 8,730,534
=============== ============== ============== ==============
Common shares outstanding (in thousands) 39,574 10,512 49,560
Book value per common share $ 10.79 $ 12.65 $ 11.30
</TABLE>
See notes to pro forma financial information.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statements of Income For the Three Months
Ended March 31, 1999 ($ in thousands, except per share data)
Hudson
United Pro forma
Bancorp JeffBanks Combined
-------------- -------------- -------------
<S> <C> <C> <C>
Interest on loans $ 68,862 $ 25,655 $ 94,517
Interest on securities 41,956 4,425 46,381
Other interest income 324 238 562
-------------- -------------- -------------
Total Interest Income 111,142 30,318 141,460
-------------- -------------- -------------
Interest on deposits 31,984 11,476 43,460
Interest on borrowings 16,611 3,766 20,377
-------------- -------------- -------------
Total Interest Expense 48,595 15,242 63,837
-------------- -------------- -------------
Net Interest Income before
provision for loan loss 62,547 15,076 77,623
Provision for loan loss 2,500 1,455 3,955
-------------- -------------- -------------
Net Interest Income after
provision for loan loss 60,047 13,621 73,668
Non-interest income 17,479 4,094 21,573
Non-interest expense 39,679 12,824 52,503
-------------- -------------- -------------
Income before income taxes 37,847 4,891 42,738
Income tax provision 13,246 997 14,243
-------------- -------------- -------------
Net income $ 24,601 $ 3,894 $ 28,495
============== ============== =============
Earnings per share:
Basic $ 0.62 $ 0.37 $ 0.57
Diluted $ 0.61 $ 0.36 $ 0.56
Weighted Average Common Shares:
(in thousands)
Basic 39,983 10,482 49,941
Diluted 40,596 10,953 51,001
</TABLE>
See notes to pro forma financial information.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statements of Income For the Year Ended
December 31, 1998 ($ in thousands, except per share data)
Hudson
United Pro forma
Bancorp JeffBanks Combined
-------------- -------------- -------------
<S> <C> <C> <C>
Interest on loans $ 298,311 $ 99,924 $ 398,235
Interest on securities 162,783 21,025 183,808
Other interest income 7,453 2,544 9,997
-------------- -------------- -------------
Total Interest Income 468,547 123,493 592,040
-------------- -------------- -------------
Interest on deposits 161,077 48,858 209,935
Interest on borrowings 53,276 14,862 68,138
-------------- -------------- -------------
Total Interest Expense 214,353 63,720 278,073
-------------- -------------- -------------
Net Interest Income before
provision for loan loss 254,194 59,773 313,967
Provision for loan loss 14,374 5,963 20,337
-------------- -------------- -------------
Net Interest Income after
provision for loan loss 239,820 52,810 293,630
Non-interest income 33,299 15,215 48,514
Non-interest expense 232,096 53,593 285,689
-------------- -------------- -------------
Income before income taxes 41,023 15,432 56,455
Income tax provision 17,872 4,000 21,872
-------------- -------------- -------------
Net income $ 23,151 $ 11,432 $ 34,583
============== ============== =============
Earnings per share:
Basic $ 0.57 $ 1.11 $ 0.69
Diluted $ 0.56 $ 1.04 $ 0.66
Weighted Average Common Shares:
(in thousands)
Basic 40,640 10,301 50,426
Diluted 41,696 10,956 52,104
</TABLE>
See notes to pro forma financial information.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statements of Income For the Year Ended
December 31, 1997 ($ in thousands, except per share data)
Hudson
United Pro forma
Bancorp JeffBanks Combined
-------------- -------------- -------------
<S> <C> <C> <C>
Interest on loans $ 306,800 $ 87,794 $ 394,594
Interest on securities 159,620 18,895 178,515
Other interest income 4,795 3,931 8,726
-------------- -------------- -------------
Total Interest Income 471,215 110,620 581,835
-------------- -------------- -------------
Interest on deposits 175,645 40,776 216,421
Interest on borrowings 40,635 14,876 55,511
-------------- -------------- -------------
Total Interest Expense 216,280 55,652 271,932
-------------- -------------- -------------
Net Interest Income before
provision for loan loss 254,935 54,968 309,903
Provision for loan loss 12,775 3,700 16,475
-------------- -------------- -------------
Net Interest Income after
provision for loan loss 242,160 51,268 293,428
Non-interest income 54,180 13,203 67,383
Non-interest expense 181,308 46,570 227,878
-------------- -------------- -------------
Income before income taxes 115,032 17,901 132,933
Income tax provision 45,205 4,570 49,775
-------------- -------------- -------------
Net income $ 69,827 $ 13,331 $ 83,158
============== ============== =============
Earnings per share:
Basic $ 1.67 $ 1.33 $ 1.62
Diluted $ 1.60 $ 1.25 $ 1.55
Weighted Average Common Shares:
(in thousands)
Basic 41,362 9,660 50,539
Diluted 43,635 10,317 53,436
</TABLE>
See notes to pro forma financial information.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statements of Income For the Year Ended
December 31, 1996 ($ in thousands, except per share data)
Hudson
United Pro forma
Bancorp JeffBanks Combined
-------------- -------------- -------------
<S> <C> <C> <C>
Interest on loans $ 287,671 $ 86,145 $ 373,816
Interest on securities 150,856 18,548 169,404
Other interest income 3,987 2,407 6,394
-------------- -------------- -------------
Total Interest Income 442,514 107,100 549,614
-------------- -------------- -------------
Interest on deposits 173,521 40,248 213,769
Interest on borrowings 27,045 11,693 38,738
-------------- -------------- -------------
Total Interest Expense 200,566 51,941 252,507
-------------- -------------- -------------
Net Interest Income before
provision for loan loss 241,948 55,159 297,107
Provision for loan losses 17,140 10,115 27,255
-------------- -------------- -------------
Net Interest Income after
provision for loan loss 224,808 45,044 269,852
Non-interest income 40,257 10,496 50,753
Non-interest expense 204,679 46,222 250,901
-------------- -------------- -------------
Income before income taxes 60,386 9,318 69,704
Income tax provision 23,490 4,238 27,728
-------------- -------------- -------------
Net income $ 36,896 $ 5,080 $ 41,976
============== ============== =============
Earnings per share:
Basic $ 0.85 $ 0.56 $ 0.81
Diluted $ 0.82 $ 0.53 $ 0.78
Weighted Average Common Shares:
(in thousands)
Basic 42,402 8,775 50,738
Diluted 44,990 9,247 53,775
</TABLE>
See notes to pro forma financial information.
Notes to Pro Forma Financial Information
(1) Pro forma information assumes the merger was consummated as of
March 31, 1999 for the pro forma unaudited combined condensed
balance sheet and as for the beginning of each of the periods
indicated for the pro forma unaudited combined condensed
statements of income. The pro forma information presented is not
necessarily indicative of the results of operations or the
combined financial position that would have resulted had the
merger been consummated at the beginning of the periods
indicated, nor is it necessarily indicative of the results of
operations in future periods or the future financial position of
the combined entities.
(2) It is assumed that the merger will be accounted for on a
pooling-of-interests accounting basis, and accordingly, the
related pro forma adjustments herein reflect, where applicable,
an exchange ratio of 0.95 shares of Hudson United common stock
for each of the 10,511,935 shares of JeffBanks common stock which
were outstanding at March 31, 1999.
(3) Anticipated cost savings net of expected merger-related expense
and restructuring charges are not expected to be material and
therefore the pro form financial information does not give effect
to those items.
(4) In summary, the pro forma financial information was adjusted for
the merger by the (i) addition of 9,986,338 shares of Hudson
United Common Stock with a stated value of $1.778 per share
amounting to $17,755,709 and (ii) elimination of 10,511,935
shares of JeffBanks common stock with a par value of $1.00 per
share amounting to $10,511,935.
(5) Earnings per share data has been computed based on the combined
historical net income applicable to common shareholders of Hudson
United using historical weighted average shares outstanding of
Hudson United common stock for the given period and the common
stock to be issued in connection with the merger.
(6) The pro forma information presented above does not reflect Hudson
United's pending acquisitions of Southern Jersey Bancorp and
retained assets and liabilities of Advest Bank or its recently
completed acquisition of Little Falls Bancorp. See "Certain
Information about Hudson United Recent Developments" on page 21.
<PAGE>
Description of Hudson United CAPITAL Stock
The authorized capital stock of Hudson United presently consists of
54,636,350 shares of common stock and 10,609,000 shares of preferred stock. As
of May 31, 1999, 40,633,204 shares of Hudson United common stock were issued and
outstanding.
Hudson United's certificate of incorporation gives the Board of
Directors authority at any time to:
o divide the authorized but unissued shares of preferred stock into
series;
o determine the designations, number of shares, relative rights,
preferences and limitations of any series of preferred stock;
o increase the number of shares of any preferred series; and
o decrease the number of shares in a preferred series, but not to a
number less than the number of shares outstanding.
Hudson United Series A Convertible Preferred Stock was issued under
this authority in connection with Hudson United's acquisition of Washington
Bancorp, Inc. on July 1, 1994. At this time no Hudson United Series A Preferred
Stock remains outstanding and the Series A Preferred Stock has been cancelled.
In December 1996, as part of the acquisition of Westport Bancorp, Inc., Hudson
United issued Hudson United Series B Convertible Preferred Stock. At this time
no shares of Hudson United Series B Convertible Preferred Stock remain
outstanding. There are no other shares of Hudson United preferred stock
outstanding.
Except in limited circumstances, Hudson United's certificate of
incorporation authorizes the Hudson United Board of Directors to issue new
shares of Hudson United common stock or preferred stock without further
shareholder action. Therefore, the Board could adversely affect the voting power
of holders of Hudson United common stock or preferred stock by issuing shares of
preferred stock with certain voting, conversion and/or redemption rights. The
purpose of this power is the ability to potentially discourage any attempt to
gain control of Hudson United.
Description of Hudson United Common Stock
Dividend Rights
Holders of Hudson United common stock are entitled to dividends when,
as and if declared by the Hudson United Board of Directors out of funds legally
available for the payment of dividends. The only statutory limitation is that
such dividends may not be paid when Hudson United is insolvent. Funds for the
payment of dividends by Hudson United must come primarily from the earnings of
Hudson United's bank subsidiaries. Thus, as a practical matter, any restrictions
on the ability of Hudson United's subsidiaries to pay dividends will act as
restrictions on the amount of funds available for payment of dividends by Hudson
United. As a New Jersey chartered commercial bank, Hudson United Bank is subject
to the restrictions contained in the New Jersey Banking Act on the payment of
dividends. Under the Banking Act, 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.
Voting Rights
At meetings of shareholders, holders of Hudson United common stock are
entitled to one vote per share. The quorum for a shareholders meeting is a
majority of the outstanding shares. Except as indicated below, actions and
authorizations to be taken or given by shareholders require the approval of a
majority of the votes cast by holders of Hudson United 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 by resolution adopted by a majority of the entire Board of Directors.
Shareholders may remove any director from office for cause. The vote of at least
three-quarters of the shares of Hudson United entitled to vote is required to
amend or repeal the provisions of Hudson United's certificate of incorporation
relating to the classification of the Board of Directors and the removal of
directors.
Hudson United's certificate of incorporation contains a "minimum price"
provision. If a "related person" proposes to enter into certain "business
combinations" with Hudson United, the proposed transaction will require the
affirmative vote of at least three-quarters of the outstanding shares entitled
to vote on the transaction. This voting requirement is in effect unless either
the proposed transaction is first approved by a majority of Hudson United's
directors or the shareholders of Hudson United are offered consideration in 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. A related
person is defined in the certificate of incorporation to include persons that,
together with their affiliates, own 10% or more of Hudson United's common stock.
Liquidation Rights
Upon a liquidation, dissolution or winding up of Hudson United, holders
of Hudson United common stock are entitled to share equally and ratably in
assets available for distribution after payment of debts and liabilities.
However, if shares of Hudson United preferred stock are outstanding at the time
of liquidation, the shares of preferred stock may have priority rights.
Assessment and Redemption
All outstanding shares of Hudson United common stock are fully paid and
nonassessable. The Hudson United common stock is not redeemable at the option of
Hudson United or the shareholders.
Preemptive and Conversion Rights
Holders of Hudson United common stock do not have conversion rights or
preemptive rights with respect to any securities of Hudson United.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF HUDSON UNITED AND JEFFBANKS
Hudson United is a business corporation incorporated in New Jersey
under the New Jersey Business Corporation Act and JeffBanks is a business
corporation incorporated in Pennsylvania under the Pennsylvania Business
Corporation Law. Pennsylvania corporate law currently governs the rights of
JeffBanks shareholders. The following is a comparison of certain provisions of
New Jersey corporate law and Pennsylvania corporate law and the charters and
by-laws of each of JeffBanks and Hudson United. This summary is not complete and
is qualified in its entirety by reference to the Pennsylvania Business
Corporation Law and the New Jersey Business Corporation Act, which statutes may
change from time to time, and the charters and by-laws of Hudson United and
JeffBanks, which also may be changed.
Special Voting Requirements
Under New Jersey corporate law, unless a greater vote is specified in
the certificate of incorporation, the affirmative vote of a majority of the
votes cast by shareholders entitled to vote on the matter is required to
approve:
o any amendment to a New Jersey corporation's certificate of
incorporation,
o the voluntary dissolution of the corporation,
o the sale or other disposition of all or substantially all of a
corporation's assets otherwise than in the ordinary course of business,
or
o the merger or consolidation of the corporation with another
corporation.
Under Hudson United's certificate of incorporation, the amendment or
repeal of the provisions governing the classification of directors requires the
approval of at least three-quarters of the shares entitled to vote.
Hudson United's certificate of incorporation also contains a "minimum
price" provision. If a "related person" proposes to enter into certain "business
combinations" with Hudson United, the proposed transaction will require the
affirmative vote of a least three-quarters of the outstanding shares entitled to
vote on the transaction. This voting requirement is in effect unless either the
proposed transaction is first approved by a majority of Hudson United's
directors or the shareholders of Hudson United are offered consideration in 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. A related
person is defined in the Certificate of Incorporation to include persons that,
together with their affiliates, own 10% or more of Hudson United's common stock.
The New Jersey Shareholders Protection Act 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 New Jersey Shareholders Protection Act
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 before the
interested shareholder's stock acquisition date. After the five-year period
expires, the prohibition on certain business combinations continues unless
o the combination is approved by the affirmative vote of two-thirds of
the voting stock not beneficially owned by the interested shareholder,
o the combination is approved by the board prior to the interested
shareholder's stock acquisition date, or
o certain fair price provisions are satisfied.
The provisions of Pennsylvania corporate law concerning amendments to a
corporation's articles of incorporation, voluntary dissolution, merger or
consolidation, and sale or other disposition of all or substantially all of a
corporation's assets other than in the ordinary course of business are
substantially similar to those of New Jersey corporate law. JeffBanks' articles
of incorporation modify these minimum voting requirements in the case of the
following fundamental transactions:
o an amendment to the JeffBanks' articles of incorporation regarding
directors;
o sale, lease, exchange or other disposition of all or substantially all
of JeffBanks' assets; or
o JeffBanks' merger, consolidation, division, reorganization,
recapitalization, dissolution, liquidation or winding up.
Adoption of any of these changes must be approved as follows:
o If the transaction has been recommended to the shareholders by the
affirmative vote of at least two-thirds of the entire Board of
Directors, the transaction is authorized upon receiving the minimum
vote required for authorization of such action by Pennsylvania
corporate law. As described above, Pennsylvania corporate law generally
requires approval by a majority of the votes cast by all shareholders
entitled to vote on the matter.
o If the transaction has not been approved by at least two-thirds of the
Board, the transaction is authorized only upon receiving the
affirmative vote of at least two-thirds of all shares entitled to vote
on the matter.
Pennsylvania corporate law also has several significant provisions
regulating fundamental corporate transactions of corporations, such as
JeffBanks, that have a class or series of stock registered under the Exchange
Act or that are otherwise subject to the reporting requirements of the Exchange
Act (so called "registered corporations"):
Control Transactions. A "control transaction" occurs if any person or
group acting in concert acquires voting power over at least 20% of the voting
shares of a registered corporation. In the event of a "control transaction," the
remaining shareholders are entitled to notice of the control acquisition from
the acquirer and to make a written demand upon the acquiring person or group to
acquire the shares of the remaining shareholders for their fair value, including
a proportion of any value payable for acquisition of control of the corporation.
New Jersey corporate law has no comparable provisions regarding
"control transactions."
Business Combinations. Pennsylvania corporate law contains provisions
similar to those of the New Jersey Shareholders Protection Act described above
except that:
o the restrictions on business combinations with an "interested
shareholder" are not limited to resident domestic corporations but
apply to all registered corporations;
o the threshold of stock ownership before a shareholder is deemed to be
an interested shareholder is 20% of the voting shares of the
corporation, rather than 10%; and
o the business combination approval requirements are different, as
described below.
Under Pennsylvania law, a registered corporation may not engage in a business
combination with an interested shareholder for five years after the shareholder
acquired its stock unless:
o the business combination was approved by the registered corporation's
board of directors before the date on which the shareholder became an
interested shareholder; or
o the business combination is approved by an absolute majority of the
voting shares, excluding shares owned by the interested shareholder or
any affiliate or associate of the interested shareholder and (x) the
interested shareholder owns at least 80% of the voting shares of the
corporation; (y) the consideration to be received by the shareholders
in connection with the business combination satisfies certain criteria
(generally that the cash and market value of non-cash consideration be
at least equal to the higher of the highest price paid by the
interested shareholder or the market value of the corporation's shares
on the date of the announcement of the business combination or the date
the interested shareholder became such); and (z) the interested
shareholder does not acquire any additional shares, with certain
limited exceptions, between the share acquisition date and the
consummation of the business combination; or
o the business combination is unanimously approved by the holders of all
of the outstanding voting shares.
After the five year restricted period, a business combination between a
registered corporation and an interested shareholder must be approved:
o by an absolute majority of the holders of the voting shares or
o at a shareholder's meeting and the business combination must meet the
criteria stated in clauses (y) and (z) above.
These restrictions on a business combination with an interested
shareholder do not apply to the merger because Hudson United is not an
interested shareholder.
Control Share Acquisitions. Pennsylvania law limits the ability of an
acquirer of 20%, 33-1/3% or 50% of the voting power of a registered corporation
to exercise its voting rights with respect to "control shares" (including shares
whose acquisition triggered the applicable threshold, shares acquired within 180
days of the control share acquisition and any shares acquired with the intention
of making a control share acquisition). A control shareholder cannot vote its
shares unless the exercise has been approved by
o an absolute majority of the outstanding voting shares and
o an absolute majority of outstanding "disinterested shares," which
generally excludes shares owned by executive officers, inside
directors, and the acquirer, its affiliates and associates and shares
that have not been owned continuously for a period from (x) the last to
occur of 12 months preceding the record date of the shareholders
meeting called for the purpose of considering the voting rights of the
control shares and five business days before the first public
disclosure of the control share acquisition and (y) the record date for
the shareholders meeting.
The acquirer may request acceleration of consideration of the voting rights
issue by agreeing to pay the cost of a special meeting of the shareholders,
among other requirements. If the acquirer does not seek voting rights, or if
voting rights are denied or lapse, the corporation is authorized to redeem all
of the control shares within two years of the control share acquisition at a
formula price specified by statute.
New Jersey corporate law has no comparable provisions regarding control
share acquisitions.
Disgorgement by Controlling Persons. Pennsylvania law requires a
"controlling person," that is, a person or group that has acquired, offered to
acquire or publicly disclosed the intention of acquiring at least a 20% voting
interest, to disgorge any profit made by the controlling person on disposition
of shares of the registered corporation during the 18 months following
attainment of "controlling person" status. The profit recovery may be enforced
by the corporation or by a shareholder if the corporation fails to prosecute
such an action.
New Jersey corporate law has no comparable provisions.
Other Provisions. Both New Jersey and Pennsylvania corporate law permit
the issuance of rights or options that include provisions that limit any person
owning or offering to acquire a specified amount of the outstanding voting
shares from exercising the rights or receiving the securities. Thus, a
Pennsylvania corporation may adopt a shareholder rights plan (often referred to
as a "poison pill") implemented to deter undesirable takeovers or accumulations
of large equity positions in the corporation. Neither Hudson United nor
JeffBanks has such a shareholder rights plan.
Pennsylvania law, unlike New Jersey law, also allows a corporation to
classify the holders of a class or series of shares into one or more special
groups by reference to any facts or circumstances that are not manifestly
unreasonable and to treat the shares held by particular shareholders differently
from other shareholders who hold shares of the same class or series. This
special treatment of shareholders may be used to effect a recapitalization or
incidental to a fundamental transaction, such as a merger or acquisition. The
adoption of such a plan must be approved by a vote of shareholders required to
approve the underlying transaction (i.e., the recapitalization or merger) and,
at the option of the board of directors, each group of shareholders that
receives the same special treatment must be given either the right to approve
the plan or dissenters' rights.
Cumulative Voting
Under New Jersey corporate law, shareholders of a New Jersey
corporation do not have cumulative voting rights in the election of directors
unless the certificate of incorporation so provides. Hudson United's certificate
of incorporation does not presently provide for cumulative voting.
Under Pennsylvania corporate law, unless otherwise provided in a
Pennsylvania corporation's articles of incorporation, shareholders have
cumulative voting rights. JeffBanks' articles of incorporation provide that
shareholders do not have cumulative voting rights.
Classified Board of Directors
New Jersey corporate law permits a New Jersey corporation to provide
for a classified board in its certificate of incorporation and Hudson United
currently has a classified board of directors. The Hudson United board is
divided into three classes, with one class of directors generally elected for
three-year terms at each annual meeting. A vacancy on the Hudson United board of
directors may be filled by the affirmative vote of two-thirds of the directors
remaining in office.
JeffBanks' articles of incorporation similarly provide for a classified
board of directors. The board is currently composed of 13 members, divided into
three classes. One class is proposed for election at each annual meeting of
shareholders and each class holds office for three years or until their
successors are elected.
Removal of Directors
Hudson United's shareholders may remove any director for cause by a
vote of at least three-quarters of the shares entitled to vote.
JeffBanks' articles of incorporation provide that the entire board of
directors, or any individual director, may be removed from office only for cause
by a vote of at least two-thirds the share entitled to be cast in the election
of directors.
Nomination of Directors and Other Matters to be Placed on Annual Meeting Agenda
JeffBanks shareholders are required to submit to JeffBanks any
nomination of a candidate for election as a director not less than 90 days
before a scheduled meeting for the election of directors, except that, if less
than 21 days' notice of the meeting is given to shareholders, nominations may be
submitted within seven days following the mailing of notice to shareholders.
Shareholders are also required to submit, in writing and in advance, any matter
desired to be placed on the agenda of the annual meeting of shareholders.
Special Meetings of Shareholders
JeffBanks' by-laws provide that special meetings of shareholders may be
called by the board of directors. Shareholders are not entitled under the
by-laws or Pennsylvania corporate law to call special meetings of shareholders,
except that an "interested shareholder" is entitled to call a meeting for
purpose of approving certain business combinations with the interested
shareholder. See "Special Voting Requirements" on page 66 for the definition of
an "interested shareholder."
Rights of Dissenting Shareholders
Shareholders of a New Jersey corporation who dissent from a merger,
consolidation, sale of all or substantially all of the corporation's assets or
certain other corporate transactions are generally entitled to appraisal rights.
No statutory right of appraisal exists, however, if:
o the stock of the New Jersey corporation is listed on a national
securities exchange,
o the stock of the New Jersey corporation is held of record by not less
than 1,000 holders, or
o 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.
Shareholders of a surviving corporation generally do not have the right
to dissent from a plan of merger unless the merger requires approval as set
forth in certain sections of New Jersey corporate law. Shareholders of Hudson
United do not have dissenters' rights because Hudson United will be the
surviving corporation, and the merger does not require approval as set forth in
applicable sections of New Jersey corporate law.
Pennsylvania corporate law similarly provides dissenters' appraisal
rights in connection with mergers, consolidations, divisions, conversions and
certain share exchanges, sales of all or substantially all of the assets outside
the ordinary course of business, articles of amendment or plans containing
provisions for the special treatment of certain shareholders, and any corporate
action taken pursuant to a shareholder vote to the extent the articles of
incorporation, bylaws or a resolution of the board of directors entitles
shareholders to dissent. No statutory dissenters' rights exist, however, with
respect to shares that are:
o listed on a national securities exchange or
o held of record by more than 2,000 shareholders.
JeffBanks common stock is held by more than 2,000 shareholders of record and,
therefore, JeffBanks shareholders do not have statutory dissenters' appraisal
rights.
Shareholder Consent to Corporate Action
Unless the certificate of incorporation provides otherwise (and Hudson
United's certificate of incorporation is currently silent on this issue), New
Jersey corporate law permits any action that can be taken at a shareholders'
meeting, other than the annual election of directors, to be taken without a
meeting upon the written consent of shareholders who would have been entitled to
cast the minimum number of votes necessary to authorize the action at a
shareholders' meeting at which all shareholders entitled to vote were present
and voting. The annual election of directors, if not conducted at a
shareholders' meeting, may only be effected by unanimous written consent. Under
New Jersey corporate law, a shareholder vote on a plan of merger or
consolidation may be effected only:
o at a shareholders' meeting,
o by unanimous written consent of all shareholders entitled to vote on
the issue with advance notice to any other shareholders, or
o by written consent of shareholders who would have been entitled to cast
the minimum number of votes necessary to authorize such action at a
meeting, together with advance notice to all other shareholders.
Under JeffBanks' articles of incorporation, unless the board of
directors otherwise directs, action may be taken by written consent of the
shareholders constituting the larger of:
o two-thirds of the total number of votes which all shareholders are
entitled to cast upon such action, or
o the minimum percentage of vote required by law.
Dividends
New Jersey corporate law generally permits a corporation to declare and
pay dividends on its outstanding stock if the corporation is not insolvent and
would not become insolvent because of the dividend payment. Funds for the
payment of dividends by Hudson United must come primarily from the earnings of
Hudson United's bank subsidiary. Thus, as a practical matter, any restrictions
on the ability of Hudson United Bank to pay dividends act as restrictions on the
amount of funds available for the payment of dividends by Hudson United.
Pennsylvania corporate law with respect to the payment of dividends is
substantially the same as New Jersey corporate law.
By-laws
Under New Jersey corporate law, the board of directors of a New Jersey
corporation has the power to adopt, amend, or repeal the corporation's by-laws,
unless such powers are reserved in the certificate of incorporation to the
shareholders. Hudson United's certificate of incorporation does not presently
reserve such powers to shareholders.
JeffBanks' by-laws may be amended by a majority vote of the board of
directors or by an affirmative vote of at least two-thirds of the shares
entitled to vote.
Limitations of Liability of Directors and Officers
Under New Jersey corporate law, a New Jersey corporation may include in
its certificate of incorporation a provision which would, subject to the
limitations described below, eliminate or limit directors' or officers'
liability to the corporation or bank, as the case may be, or to its
shareholders, for monetary damage for breaches of their fiduciary duty of care.
A director or officer cannot be relieved from liability or otherwise indemnified
for any breach of duty based upon an act or omission
o in breach of such person's duty of loyalty to the entity or its
shareholders,
o not in good faith or involving a knowing violation of law, or
o resulting in receipt by such person of an improper personal benefit.
Hudson United's certificate of incorporation contains provisions which limit a
director's or officer's liability to the full extent permitted by New Jersey
law.
Pennsylvania corporate law permits a Pennsylvania corporation to
provide in a by-law adopted by the shareholders that a director will not be
personally liable for monetary damages in any action unless:
o the director has breached or failed to perform the duties of office,
and
o the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness.
This limitation of liability does not apply to:
o the responsibility or liability of a director under any criminal
statute, or
o the liability of a director for payment of taxes under federal, state
or local law.
JeffBanks' by-laws limit a director's liability to the full extent permitted by
Pennsylvania law. Pennsylvania corporate law does not permit a similar
limitation of liability with respect to a corporation's officers.
Consideration of Acquisition Proposals
New Jersey corporate law provides that in determining whether a
proposal or offer to acquire a corporation is in the best interest of the
corporation, the board may, in addition to considering the effects of any action
on shareholders, consider any of the following:
o the effects of the proposed action on the corporation's employees,
suppliers, creditors and customers;
o the effects on the community in which the corporation operates; and
o the long-term as well as short-term interests of the corporation and
its shareholders, including the possibility that those interests may be
served best by the continued independence of the corporation.
The statute further provides that if, based on those factors, the board
determines that any such offer is not in the best interest of the corporation,
it may reject the offer. These provisions may make it more difficult for a
shareholder to challenge the Hudson United board's rejection of, and may
facilitate the board's rejection of, an offer to acquire Hudson United.
Under Pennsylvania corporate law, directors may, in considering the
best interests of the corporation, consider any of the following to the extent
they deem appropriate:
o the effects of any action upon any or all groups affected by the
action, including shareholders, employees, suppliers, customers and
creditors of the corporation, and upon communities in which officers or
other establishments of the corporation are located;
o the short-term and long-term interests of the corporation, including
benefits that may accrue to the corporation from its long-term plans
and the possibility that these interests may be best served by the
continued independence of the corporation;
o the resources, intent and conduct (past, stated and potential) of any
person seeking to acquire control of the corporation; and
o all other pertinent factors.
In considering the best interests of the corporation or the effects of any
action, the directors are not required to regard any corporate interest or the
interests of any particular group affected by the action as a dominant or
controlling interest or factor. In addition, in assessing whether the directors'
standard of care has been satisfied, the directors are not under any greater
obligation to justify, or a higher burden of proof with respect to, any action
in connection with the acquisition of the corporation than applies to any other
act of the directors. Like the provisions of New Jersey law, these provisions
may make it more difficult for shareholders to challenge directors' decisions
with respect to acquisition of a corporation.
Preferred Stock
Hudson United can issue new shares of authorized but unissued common
stock or "blank check" preferred stock without shareholder approval, except in
connection with certain transactions with "Interested Persons." See "Description
of Hudson United Capital Stock."
JeffBanks has similar rights to issue common and preferred stock.
Inspection Rights
Under the New Jersey corporate law, shareholders are entitled, upon
written request, to obtain a balance sheet as of the end of Hudson United's most
recent fiscal year, and its profit and loss and surplus statement for such
fiscal year. The New Jersey corporate law further permits (i) any person who has
been a shareholder of record of Hudson United for six months or (ii) any person
holding, or so authorized in writing by persons holding, at least 5% of the
outstanding shares of any class or series, upon five days' written demand, for
any proper purpose (generally, a purpose related to the business of the
corporation) to examine the minutes and proceedings of shareholders and record
of shareholders, and to make extracts from them. In addition, the officer or
agent having charge of the stock transfer books for shares of Hudson United is
required to prepare a complete list of shareholders entitled to vote at a
shareholders' meeting, arranged alphabetically within each class, with the
address and number of shares held by each. The list must be produced at the
meeting and is subject to the inspection of any shareholder for reasonable
periods during the meeting.
Under Pennsylvania corporate law and pursuant to JeffBanks' by-laws,
every shareholder has a right, upon written verified demand stating the
shareholder's purpose, to examine, in person or by agent or attorney, the share
register, books and records of account, and records of the proceedings of the
JeffBanks incorporators, shareholders and directors and to make copies or
extracts from such records. The shareholder's purpose for requesting access must
be reasonably related to the interest of the person as a shareholder. In
addition, the officer or agent having charge of the stock transfer books is
required to prepare a complete list of shareholders entitled to vote at any
meeting of shareholders, arranged in alphabetical order, with the address and
number of shares held by each. The list must be produced and kept open at the
time and place of the meeting and is subject to the inspection of any
shareholder during the meeting.
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by Hudson United (Commission File No.
1-8660) with the SEC are hereby incorporated in this joint proxy
statement-prospectus:
o Annual Report on Form 10-K for the year ended December 31, 1998
o Quarterly Report on Form 10-Q for the quarter ended March 31, 1999
o Current Reports on Form 8-K filed with the SEC on January 29, March 29,
April 19, April 21, April 22, May 25, June 29 and July 26, 1999.
o The description of Hudson United common stock set forth in Hudson
United's Registration Statement on Form 8-A12B filed by Hudson United
on April 22, 1999, pursuant to Section 12 of the Exchange Act, and any
amendment or report filed for the purpose of updating such description.
The following documents filed by JeffBanks (Commission File No.
001-14318) with the SEC are hereby incorporated in this joint proxy
statement-prospectus:
o Annual Report on Form 10-K for the year ended December 31, 1998
o Quarterly Report on Form 10-Q for the quarter ended March 31, 1999
o Current Reports on Form 8-K filed with the SEC on July 29, 1999.
o The description of JeffBanks common stock set forth in JeffBanks'
Registration Statement on Form 8-A filed by JeffBanks pursuant to
Section 12 of the Exchange Act, and any amendment or report filed for
the purpose of updating such description
All documents filed by Hudson United or JeffBanks pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act after the date of this document
but before the earlier of
o the date of the JeffBanks meeting,
o the date of the Hudson United meeting, or
o the termination of the merger agreement,
are hereby incorporated by reference into this document and shall be deemed a
part this document from the date they are filed.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this joint proxy
statement prospectus to the extent that a statement contained herein or in any
subsequently filed document which 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 joint proxy statement prospectus.
The public may read and copy any documents Hudson United or JeffBanks
files with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, DC 20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet site that contains reports, proxy and information
statements, and other information about Hudson United and JeffBanks at
http://www.sec.gov.
<PAGE>
OTHER MATTERS
As of the date of this joint proxy statement-prospectus, the JeffBanks
Board of Directors knows of no other matters to be presented for action by the
shareholders at the JeffBanks meeting. If any other matters are properly
presented, however, it is the intention of the persons named in the enclosed
proxy to vote in accordance with their best judgment on such matters.
As of the date of this joint proxy statement-prospectus, the Hudson
United Board of Directors knows of no other matters to be presented for action
by the shareholders at the Hudson United meeting. If any other matters are
properly presented, however, it is the intention of the persons named in the
enclosed proxy to vote in accordance with their best judgment on such matters.
LEGAL OPINION
Certain legal matters relating to the issuance of the shares of Hudson
United common stock offered hereby and certain tax consequences of the merger
will be passed upon by Pitney, Hardin, Kipp & Szuch, counsel to Hudson United.
EXPERTS
The consolidated financial statements of JeffBanks as of December 31,
1998 and 1997 and for each of the three years in the period ended December 31,
1998, incorporated by reference in this joint proxy statement-prospectus, have
been audited by Grant Thornton LLP, independent certified public accountants,
whose report thereon appears therein, and in reliance upon such report of Grant
Thornton given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Hudson United as of December
31, 1998 and 1997 and for each of the years in the three-year period ended
December 31, 1998, incorporated by reference in this joint proxy
statement-prospectus and in the registration statement, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of such firm as experts in accounting and auditing.
Representatives of Grant Thornton will be present at the JeffBanks
meeting. Representatives of Arthur Andersen will be present at the Hudson United
meeting. They will be given an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
shareholders present at the meetings.
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 28, 1999
(this "Agreement"), is among Hudson United Bancorp. ("HUB"), a New Jersey
corporation and registered bank holding company, Hudson United Bank (the
"Bank"), a New Jersey state-chartered commercial banking corporation and
wholly-owned subsidiary of HUB, JeffBanks, Inc. a Pennsylvania corporation and
registered bank holding company ("JBI"), Jefferson Bank, a Pennsylvania bank and
wholly-owned subsidiary of JBI ("JBPA") and Jefferson Bank of New Jersey, a New
Jersey bank and wholly-owned subsidiary of JBI ("JBNJ") (JBPA and JBNJ
collectively, the "Jefferson Banks").
RECITALS
The respective Boards of Directors of HUB and JBI have each
determined that it is in the best interests of HUB and JBI and their respective
shareholders for HUB to acquire JBI by merging JBI with and into HUB with HUB
surviving and JBI shareholders receiving the consideration hereinafter set
forth. Immediately after the merger of JBI into HUB, each of the Jefferson Banks
shall be merged with and into the Bank with the Bank surviving.
The respective Boards of Directors of JBI, HUB, the Bank and
the Jefferson Banks have each duly adopted and approved this Agreement and the
Board of Directors of JBI has directed that it be submitted to both HUB's and
JBI's shareholders for approval.
As a condition for HUB to enter into this Agreement, HUB has
required that it receive an option on certain authorized but unissued shares of
JBI Common Stock (as hereinafter defined) and, simultaneously with the execution
of this Agreement, JBI is issuing an option to HUB (the "HUB Stock Option") to
purchase certain shares of the authorized and unissued JBI Common Stock subject
to the terms and conditions set forth in the Agreement governing the HUB Stock
Option.
NOW, THEREFORE, intending to be legally bound, the parties
hereto hereby agree as follows:
ARTICLE I - THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as hereafter defined), JBI shall be merged
with and into HUB (the "Merger") in accordance with the New Jersey Business
Corporation Act and the Pennsylvania Business Corporation Law and HUB 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 HUB and JBI and thereupon and thereafter, all the property, rights,
privileges, powers and franchises of each of HUB and JBI 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 HUB and JBI 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 HUB and JBI 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 HUB or JBI is a
party shall not be deemed to have abated or to have discontinued by reason of
the Merger, but may be prosecuted to final judgment, order or decree in the same
manner as if the Merger had not been made; or the Surviving Corporation may be
substituted as a party to such action or proceeding, and any judgment, order or
decree may be rendered for or against it that might have been rendered for or
against either of HUB or JBI if the Merger had not occurred.
1.3. Certificate of Incorporation. As of the Effective Time,
the certificate of incorporation of HUB shall be the certificate of
incorporation of the Surviving Corporation until otherwise amended as provided
by law.
1.4. Bylaws. As of the Effective Time, the Bylaws of HUB shall
be the Bylaws of the Surviving Corporation until otherwise amended as provided
by law.
1.5. Directors and Officers. As of the Effective Time, the
directors and officers of HUB shall be the directors and officers of the
Surviving Corporation.
1.6 Closing, Closing Date; Determination Date and Effective
Time. Unless a different date, time and/or place are agreed to by the parties
hereto, the closing of the Merger (the "Closing") shall take place at 10:00
a.m., at the offices of Pitney, Hardin, Kipp & Szuch, 200 Campus Drive, Florham
Park, New Jersey, on a date determined by HUB on at least five business days
notice (the "Closing Notice") given by HUB to JBI, which date (the "Closing
Date") shall be not less than seven nor more than 10 business days following the
receipt of all necessary regulatory, governmental and shareholder approvals and
consents and the expiration of all statutory waiting periods in respect thereof
and the satisfaction or waiver of all of the conditions to the consummation of
the Merger specified in Article VI hereof (other than the delivery of
certificates, opinions and other instruments and documents to be delivered at
the Closing). The Closing Notice shall specify the scheduled Closing Date, and
shall specify the "Determination Date," which shall be the fifth business day
prior to the scheduled Closing Date. Simultaneous with or immediately following
the Closing, HUB and JBI shall cause to be filed certificates of merger, in form
and substance satisfactory to HUB and JBI, with the Department of the Treasury,
State of New Jersey (the "New Jersey Certificate of Merger") and the Secretary
of State of the Commonwealth of Pennsylvania (the "Pennsylvania Certificate of
Merger" together with the New Jersey Certificate of Merger, the "Certificates of
Merger"). The Certificate of Mergers shall each specify the "Effective Time" of
the Merger, which Effective Time shall be a date and time following the Closing
agreed to by HUB and JBI (which date and time the parties currently anticipate
will be the close of business on the Closing Date). In the event the parties
fail to specify the date and time in the Certificate of Merger, the Merger shall
become effective upon (and the "Effective Time" shall be) the time of the filing
of the later of the Certificates of Merger.
1.7 The Bank Mergers. Immediately following the Effective
Time, JBPA shall be then merged with and into the Bank in accordance with the
provisions of the New Jersey Banking Act of 1948, as amended (the "New Jersey
Banking Act") and the Pennsylvania Banking Code of 1965, as amended (the
"Pennsylvania Code") and JBNJ shall be merged with and into the Bank in
accordance with the New Jersey Banking Act (the "Bank Mergers"). In each of the
Bank Mergers, the Bank shall be the surviving bank (the "Surviving Bank"). Upon
the consummation of the Bank Mergers, the separate existence of each of the
Jefferson Banks shall cease and the Surviving Bank shall be considered the same
business and corporate entity as each of the Jefferson Banks and the Bank and
all of the property, rights, privileges, powers and franchises of each of the
Jefferson Banks and the Bank shall vest in the Surviving Bank and the Surviving
Bank shall be deemed to have assumed all of the debts, liabilities, obligations
and duties of each of the Jefferson Banks and the Bank and shall have succeeded
to all or each of their relationships, fiduciary or otherwise, as fully and to
the same extent as if such property, rights, privileges, powers, franchises,
debts, obligations, duties and relationships had been originally acquired,
incurred or entered into by the Surviving Bank. Upon the consummation of the
Bank Mergers, the certificate of incorporation and Bylaws of the Bank shall be
the certificate of incorporation and Bylaws of the Surviving Bank and the
officers and directors of the Bank shall be the officers and directors of the
Surviving Bank. Following the execution of this Agreement, JBPA and the Bank
shall execute and deliver a merger agreement and JBNJ and the Bank shall execute
and deliver a merger agreement (collectively, the "Bank Merger Agreements"),
both in form and substance reasonably satisfactory to the parties hereto, each
as substantially set forth in Exhibit 1.7 hereto, for delivery to the
Commissioner of the New Jersey Department of Banking and Insurance (the "New
Jersey Department"), the Pennsylvania Department of Banking (the "Pennsylvania
Department"), and the Federal Deposit Insurance Corporation (the "FDIC"), with
respect to the merger of JBPA into the Bank, and to the New Jersey Department
and the FDIC, with respect to the merger of JBNJ into the Bank, for approval of
the Bank Mergers.
ARTICLE II - CONVERSION OF JBI SHARES
2.1. Conversion of JBI Common Stock. Each share of common
stock, par value $1.00 per share, of JBI ("JBI Common Stock"), issued and
outstanding immediately prior to the Effective Time (other than Excluded Shares,
as hereinafter defined) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted as follows:
(a) Exchange of Common Stock; Exchange Ratio. Subject to the provisions
of this Section 2.1, each share of JBI Common Stock issued and outstanding
immediately prior to the Effective Time (other than Excluded Shares) shall be
converted at the Effective Time into the right to receive .95 shares (the
"Exchange Ratio") of Common Stock, no par value, of HUB ("HUB Common Stock")
subject to adjustment as provided in Section 2.1(c) and subject to the payment
of cash in lieu of fractional shares in accordance with Section 2.2(e).
(b) Cancellation of JBI Certificates. After the Effective Time, all
such shares of JBI Common Stock (other than those canceled pursuant to Section
2.1(d)) shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each certificate previously evidencing any
such shares (other than those canceled pursuant to Section 2.1(d)) shall
thereafter represent the right to receive the Merger Consideration (as defined
in Section 2.2(b)). The holders of such certificates previously evidencing such
shares of JBI Common Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares of JBI Common Stock
except as otherwise provided herein or by law. Such certificates previously
evidencing such shares of JBI Common Stock (other than those canceled pursuant
to Section 2.1(d)) shall be exchanged for certificates evidencing shares of HUB
Common Stock issued pursuant to this Article II, upon the surrender of such
certificates in accordance with this Article II. No fractional shares of HUB
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 HUB 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 (a "Capital Change"), the Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend, stock split,
reclassification, recapitalization, merger, combination or exchange of shares.
(d) Excluded Shares. All shares of JBI Common Stock held by JBI in its
treasury or owned by HUB or by any of HUB's wholly-owned subsidiaries (other
than shares held as trustee or in a fiduciary capacity and shares held as
collateral on or in lieu of a debt previously contracted) immediately prior to
the Effective Time ("Excluded Shares") shall be canceled.
2.2. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, HUB shall
deposit, or shall cause to be deposited, with Hudson United Bank, Trust
Department or another bank or trust company designated by HUB and reasonably
acceptable to JBI (the "Exchange Agent"), for the benefit of the holders of
shares of JBI Common Stock, for exchange in accordance with this Article II,
through the Exchange Agent, certificates evidencing shares of HUB Common Stock
and cash in such amount such that the Exchange Agent possesses such number of
shares of HUB Common Stock and such amount of cash as are required to provide
all of the consideration required to be exchanged by HUB pursuant to the
provisions of this Article II (such certificates for shares of HUB Common Stock,
together with any dividends or distributions with respect thereto, and cash
being hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the HUB Common Stock and cash out
of the Exchange Fund in accordance with Sections 2.1 and 2.2(b). Except as
contemplated by Section 2.2(f) hereof, the Exchange Fund shall not be used for
any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable
either before or after the Effective Time, but in any event no later than five
business days after the Effective Time, HUB 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 JBI Common Stock
(the "Certificates"), (i) a letter of transmittal (the form and substance of
which is reasonably agreed to by HUB and JBI 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 HUB may
reasonably specify) and (ii) instructions for effecting the surrender of the
Certificates in exchange for certificates evidencing shares of HUB Common Stock
and cash in lieu of fractional shares. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor (x) certificates evidencing that number of whole shares of
HUB Common Stock which such holder has the right to receive in respect of the
shares of JBI Common Stock formerly evidenced by such Certificate in accordance
with Section 2.1 and (y) cash in lieu of fractional shares of HUB Common Stock
to which such holder may be entitled pursuant to Section 2.2(e) (the shares of
HUB Common Stock and cash described in clauses (x) and (y) being collectively
referred to as the "Merger Consideration") and the Certificates so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of shares
of JBI Common Stock which is not registered in the transfer records of JBI, a
certificate evidencing the proper number of shares of HUB Common Stock and/or
cash may be issued and/or paid in accordance with this Article II to a
transferee if the Certificate evidencing such shares of JBI Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.2, each Certificate shall be deemed at any time after the Effective Time to
evidence only the right to receive upon such surrender the Merger Consideration.
(c) Distributions with Respect to Unexchanged Shares of HUB
Common Stock. No dividends or other distributions declared or made after the
Effective Time with respect to HUB Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of HUB Common Stock evidenced thereby, and no other part
of the Merger Consideration shall be paid to any such holder, until the holder
of such Certificate shall surrender such Certificate (or a suitable affidavit of
loss and customary bond). Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificates evidencing shares of HUB Common Stock issued in exchange therefor,
without interest, (i) promptly, the Merger Consideration to which such holder is
entitled pursuant to Section 2.2(b) and the amount of dividends or other
distributions with a record date on or after the Effective Time theretofore paid
with respect to the shares of HUB Common Stock to which such holder is entitled,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions, with a record date on or after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such shares of HUB Common Stock.
(d) No Further Rights in JBI Common Stock. All shares of HUB
Common Stock issued and cash paid upon conversion of the shares of JBI Common
Stock in accordance with the terms hereof shall be deemed to have been issued or
paid in full satisfaction of all rights pertaining to such shares of JBI Common
Stock.
(e) No Fractional Shares; Median Pre-Closing Price. No
certificates or scrip evidencing fractional shares of HUB Common Stock shall be
issued upon the surrender for exchange of Certificates and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
shareholder of HUB. Cash shall be paid in lieu of fractional shares of HUB
Common Stock, based upon the Median Pre-Closing Price of the HUB Common Stock.
The "Median Pre-Closing Price" shall 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 10 consecutive trading day period which ends on
(and includes) the Determination Date. The "Closing Price" shall mean the
closing price of HUB Common Stock as supplied by the New York Stock Exchange 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 New York Stock Exchange, or
such other national securities exchange on which HUB Common Stock may be traded
after the date hereof, is referred to herein as the "NYSE")
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of JBI Common Stock for two
years after the Effective Time shall be delivered to HUB, upon demand, and any
holders of JBI Common Stock who have not theretofore complied with this Article
II shall thereafter look only to HUB for the Merger Consideration, dividends and
distributions to which they are entitled.
(g) No Liability. Neither HUB, the Bank nor the Exchange Agent
shall be liable to any holder of shares of JBI Common Stock for any such shares
of HUB Common Stock or cash (or dividends or distributions with respect thereto)
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(h) Withholding Rights. HUB 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 JBI Common Stock, the minimum amounts (if any)
that HUB 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 HUB,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of JBI Common Stock in respect of which such
deduction and withholding was made by HUB.
2.3. Stock Transfer Books. At the Effective Time, the stock
transfer books of JBI shall be closed and there shall be no further registration
of transfers of shares of JBI Common Stock thereafter on the records of JBI. On
or after the Effective Time, any Certificates presented to the Exchange Agent or
HUB for transfer shall be converted into the Merger Consideration.
2.4. JBI Stock Options. Other than the HUB Stock Option, all
options which may be exercised for issuance of JBI Common Stock (each, a "Stock
Option" and collectively the "Stock Options") are described in the JBI
Disclosure Schedule and are issued and outstanding pursuant to the Key Employee
Stock Option Plan (the "JBI Stock Option Plan") and the agreements pursuant to
which such Stock Options were granted (each, an "Option Grant Agreement"). HUB
acknowledges and agrees to honor the provisions of the JBI Stock Option Plan and
the Option Grant Agreements, including those relating to vesting and conversion
in connection with a change in control of JBI. Each Stock Option outstanding at
the Effective Time (each, a "Continuing Stock Option") shall be converted into
an option to purchase HUB Common Stock, wherein (i) the right to purchase shares
of JBI Common Stock pursuant to the Continuing Stock Option shall be converted
into the right to purchase that same number of shares of HUB Common Stock
multiplied by the Exchange Ratio, (ii) the option exercise price per share of
HUB Common Stock shall be the previous option exercise price per share of the
JBI 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 HUB or
a subsidiary of HUB shall not be deemed to have terminated service for purposes
of determining the Continuing Stock Option exercise period) and for all
Continuing Stock Options, such adjustments shall be and are intended to be
effected in a manner which is consistent with Section 424(a) of the Code (as
defined in Section 3.8 hereof). Shares of HUB Common Stock issuable upon
exercise of Continuing Stock Options shall be covered by an effective
registration statement on Form S-8, and HUB shall use its reasonable best
efforts to file a registration statement on Form S-8 covering such shares as
soon as possible after the Effective Time.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF JBI
References herein to "JBI 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 JBI to HUB. JBI
hereby represents and warrants to HUB as follows:
3.1. Corporate Organization.
(a) JBI is a corporation duly organized and validly existing
under the laws of the Commonwealth of Pennsylvania. JBI has the corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted, and is duly licensed or qualified to
do business in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary, except where the failure
to be so licensed or qualified would not have a material adverse effect on the
business, operations, assets or financial condition of JBI and the JBI
Subsidiaries (as defined below), taken as a whole. JBI is registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended (the
"BHCA").
(b) Each JBI Subsidiary and its jurisdiction of incorporation
is listed in the JBI Disclosure Schedule. For purposes of this Agreement, the
term "JBI Subsidiary" means any corporation, partnership, joint venture or other
legal entity in which JBI, directly or indirectly, owns at least a 50% stock or
other equity interest or for which JBI, 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 "JBI Subsidiary" shall include any entity which was a JBI Subsidiary at
any time during such period. JBPA is a bank duly organized and validly existing
in stock form under the laws of the Commonwealth of Pennsylvania. JBNJ is a bank
duly organized and validly existing in stock form under the laws of the State of
New Jersey. All eligible accounts of depositors issued by each of the Jefferson
Banks are insured by the Bank Insurance Fund of the FDIC (the "BIF") to the
fullest extent permitted by law. Each JBI Subsidiary has the corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except where the failure to
be so licensed or qualified would not have a material adverse effect on the
business, operations, assets or financial condition of JBI and the JBI
Subsidiaries, taken as a whole.
(c) The JBI Disclosure Schedule sets forth true and complete
copies of the Certificate of Incorporation and Bylaws, as in effect on the date
hereof, of JBI and each material JBI Subsidiary. Except as set forth in the JBI
Disclosure Schedule, the Jefferson Banks and JBI do not own or control, directly
or indirectly, any equity interest in any corporation, company, Jefferson Banks,
partnership, joint venture or other entity.
3.2. Capitalization. The authorized capital stock of JBI
consists of 20,000,000 shares of JBI Common Stock. As of June 28, 1999, there
were 10,511,935 shares of JBI Common Stock issued and outstanding. The JBI
Disclosure Schedule contains (i) a list of all Stock Options, their strike
prices and expiration dates, and (ii) true and complete copies of the JBI Stock
Option Plan and a specimen of each form of Option Grant Agreement pursuant to
which any outstanding Stock Option was granted, including a list of each
outstanding Stock Option issued pursuant thereto. All Stock Options will be
fully vested on the Closing Date, in each case in accordance with the terms of
the JBI Stock Option Plan and Option Grant Agreements pursuant to which such
Stock Options were granted. All issued and outstanding shares of JBI Common
Stock, and all issued and outstanding shares of capital stock of each JBI
Subsidiary, have been duly authorized and validly issued, are fully paid,
nonassessable and free of preemptive rights and are free and clear of any liens,
encumbrances, charges, restrictions or rights of third parties imposed by JBI or
any JBI Subsidiary. Except for the Stock Options listed on the JBI Disclosure
Schedule and the HUB Stock Option, neither JBI nor the Jefferson Banks 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 JBI or the Jefferson
Banks or any securities representing the right to purchase, subscribe or
otherwise receive any shares of such capital stock or any securities convertible
into any such shares, and there are no agreements or understandings with respect
to voting of any such shares.
3.3. Authority; No Violation.
(a) Subject to the approval of this Agreement and the
transactions contemplated hereby by all applicable regulatory authorities and by
the shareholders of JBI, and except as set forth in the JBI Disclosure Schedule,
JBI and each of the Jefferson Banks have the full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by the directors of JBI and the
Jefferson Banks in accordance with their respective Certificates of
Incorporation and Bylaws and applicable laws and regulations. Except for such
approvals, no other corporate proceedings not otherwise contemplated hereby on
the part of JBI or the Jefferson Banks are necessary to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by JBI and each of the Jefferson Banks, and constitutes a valid
and binding obligation of each of JBI and each of the Jefferson Banks,
enforceable against JBI and each of the Jefferson Banks 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 Pennsylvania or New
Jersey state-chartered 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
JBI or any of the Jefferson Banks, nor the consummation by JBI or any of the
Jefferson Banks of the transactions contemplated hereby in accordance with the
terms hereof, or compliance by JBI or any of the Jefferson Banks with any of the
terms or provisions hereof, will (i) violate any provision of JBI's or any of
the Jefferson Banks' Certificate of Incorporation or Bylaws, (ii) assuming that
the consents and approvals set forth below are duly obtained, violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to JBI, any of the Jefferson Banks or any of their
respective properties or assets, or (iii) except as set forth in the JBI
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 JBI or any of the Jefferson Banks 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 JBI
or any of the Jefferson Banks is a party, or by which they or any of their
respective properties or assets may be bound or affected except, with respect to
(ii) and (iii) above, such as individually or in the aggregate will not have a
material adverse effect on the business, operations, assets or financial
condition of JBI and the JBI Subsidiaries, taken as a whole, and which will not
prevent or materially delay the consummation of the transactions contemplated
hereby. Except for consents and approvals of or filings or registrations with or
notices to the Board of Governors of the Federal Reserve System (the "FRB"), the
FDIC, the New Jersey Department, the Connecticut Department, the New Jersey
Department of Environmental Protection (the "NJDEP") (if required), the
Pennsylvania Department of Environmental Protection (the "PDEP") (if required),
the Securities and Exchange Commission (the "SEC"), and the shareholders of JBI,
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 JBI or
any of the Jefferson Banks in connection with (x) the execution and delivery by
JBI of this Agreement and (y) the consummation by JBI of the Merger, and the
consummation by JBI and the Jefferson Banks of the other transactions
contemplated hereby, except (i) such as are listed in the JBI Disclosure
Schedule and (ii) such as individually or in the aggregate will not (if not
obtained) have a material adverse effect on the business, operations, assets or
financial condition of JBI and the JBI Subsidiaries taken as a whole or prevent
or materially delay the consummation of the transactions contemplated hereby. To
the best of JBI's knowledge, no fact or condition exists which JBI has reason to
believe will prevent it and the Jefferson Banks from obtaining the
aforementioned consents and approvals.
3.4. Financial Statements.
(a) The JBI Disclosure Schedule sets forth copies of the
consolidated statements of financial condition of JBI as of December 31, 1997
and 1998, 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 1996 through 1998, in each case accompanied by
the audit report of Grant Thornton, LLP, independent public accountants with
respect to JBI ("Grant Thornton"), and the unaudited consolidated statement of
condition of JBI as of March 31, 1999 and the related unaudited consolidated
statements of income and cash flows for the three months ended March 31, 1998
and 1999, as reported in JBI's Quarterly Report on Form 10-Q, filed with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act")
(collectively, the "JBI Financial Statements"). The JBI Financial Statements
(including the related notes) have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied during the periods
involved (except as may be indicated therein or in the notes thereto), and
fairly present the consolidated financial condition of JBI as of the respective
dates set forth therein, and the related consolidated statements of income,
changes in stockholders' equity and cash flows fairly present the results of the
consolidated operations, changes in shareholders' equity and cash flows of JBI
for the respective periods set forth therein.
(b) The books and records of JBI and each of its Subsidiaries
are being maintained in material compliance with applicable legal and accounting
requirements.
(c) Except as and to the extent reflected, disclosed or
reserved against in the JBI Financial Statements (including the notes thereto),
as of December 31, 1998, neither JBI nor any JBI Subsidiary had any liabilities,
whether absolute, accrued, contingent or otherwise, material to the business,
operations, assets or financial condition of JBI and the JBI Subsidiaries, taken
as a whole which were required by GAAP (consistently applied) to be disclosed in
JBI's consolidated statement of condition as of December 31, 1998 or the notes
thereto. Since December 31, 1998, neither JBI nor any JBI Subsidiary has
incurred any liabilities except in the ordinary course of business and
consistent with past business practice, except as related to the transactions
contemplated by this Agreement or except as set forth in the JBI Disclosure
Schedule.
3.5. Broker's and Other Fees. Except for Keefe, Bruyette &
Woods, Inc. ("KBW"), neither JBI nor any of its Subsidiaries nor any of their
respective directors or officers has employed any broker or finder or incurred
any liability for any broker's or finder's fees or commissions in connection
with any of the transactions contemplated by this Agreement. The agreement with
KBW is set forth in the JBI Disclosure Schedule. Other than pursuant to the
agreement with KBW, there are no fees (other than time charges billed at usual
and customary rates) payable to any consultants, including lawyers and
accountants, in connection with this transaction or which would be triggered by
consummation of this transaction or the termination of the services of such
consultants by JBI or any its Subsidiaries.
3.6. Absence of Certain Changes or Events.
(a) Except as disclosed in the JBI Disclosure Schedule, there
has not been any JBI Material Adverse Change (as hereinafter defined) since
December 31, 1998 and to the best of JBI's knowledge, no fact or condition
exists which JBI believes will cause such an JBI Material Adverse Change in the
future. "JBI Material Adverse Change" means any change which is material and
adverse to the consolidated financial condition, results of operations, business
or assets of JBI and the JBI Subsidiaries taken as a whole, other than (i) a
change in the value of the respective investment and loan portfolios of JBI and
the JBI Subsidiaries as the result of a change in interest rates generally, (ii)
a change occurring after the date hereof in any federal or state law, rule or
regulation or in GAAP, which change affects commercial banks generally, (iii)
reasonable expenses incurred in connection with this Agreement and the
transactions contemplated hereby, (iv) payments to executive officers or other
employees of JBI or the Jefferson Banks pursuant to agreements or arrangements
with such persons, which agreements or arrangements are included in the JBI
Disclosure Schedule, or (v) actions or omissions of JBI or any JBI Subsidiary
either specifically permitted by this Agreement or taken with the prior written
consent of HUB in contemplation of the transactions contemplated hereby
(including without limitation any actions taken by JBI or the Jefferson Banks
pursuant to Section 5.15 of this Agreement).
(b) Except as set forth in the JBI Disclosure Schedule and
except for capital expenditures, neither JBI nor any JBI Subsidiary has taken or
permitted any of the actions set forth in Section 5.2 hereof between December
31, 1998 and the date hereof and, except for execution of this Agreement, and
the other documents contemplated hereby, JBI and each JBI Subsidiary has
conducted their respective businesses only in the ordinary course, consistent
with past practice.
3.7. Legal Proceedings. Except as disclosed in the JBI
Disclosure Schedule, and except for ordinary routine litigation incidental to
the business of JBI and the JBI Subsidiaries, neither JBI nor any JBI Subsidiary
is a party to any, and there are no pending or, to the best of JBI's knowledge,
threatened legal, administrative, arbitral or other proceedings, claims, actions
or governmental investigations of any nature against JBI or any JBI Subsidiary
which, if decided adversely to JBI or any JBI Subsidiary, are reasonably likely
to have a material adverse effect on the business, operations, assets or
financial condition of JBI and the JBI Subsidiaries taken as a whole. Except as
disclosed in the JBI Disclosure Schedule, neither JBI nor any JBI Subsidiary is
a party to any order, judgment or decree entered in any lawsuit or proceeding
which is material to JBI or such JBI Subsidiary.
3.8. Taxes and Tax Returns.
(a) JBI and each JBI 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
HUB in writing) or against which reserves have been established. JBI and each
JBI 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
JBI or such JBI Subsidiary through such date. None of the federal or state
income tax returns of JBI or any JBI Subsidiary have been examined by the
Internal Revenue Service (the "IRS"), the New Jersey Division of Taxation, or
the Pennsylvania Department of Revenue within the past six years. To the best
knowledge of JBI, except as disclosed in the JBI Disclosure Schedule, there are
no audits or other administrative or court proceedings presently pending nor any
other disputes pending with respect to, or claims asserted for, taxes or
assessments upon JBI or any JBI Subsidiary, nor has JBI or any JBI 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 JBI nor any JBI Subsidiary (i) has requested any
extension of time within which to file any Return which Return has not since
been filed, (ii) is a party to any agreement providing for the allocation or
sharing of taxes except as disclosed in the JBI Disclosure Schedule, (iii) is
required to include in income any adjustment pursuant to Section 481(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), by reason of a voluntary
change in accounting method initiated by JBI or such JBI Subsidiary (nor does
JBI have any knowledge that the IRS has proposed any such adjustment or change
of accounting method), or (iv) has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply.
(c) Neither JBI nor any JBI Subsidiary has any tax loss
carryforwards.
3.9. Employee Benefit Plans.
(a) Except as set forth on the JBI Disclosure Schedule,
neither JBI nor any JBI Subsidiary maintains or contributes to any "employee
pension benefit plan" (the "JBI Pension Plans") within the meaning of such term
in Section 3(2)(A) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), "employee welfare benefit plan" (the "JBI Welfare Plans")
within the meaning of such term in Section 3(1) of ERISA, stock option plan,
stock purchase plan, deferred compensation plan, severance plan, bonus plan,
employment agreement, director retirement program or other similar plan, program
or arrangement. Neither JBI nor any JBI Subsidiary has, since September 2, 1974,
contributed to any "Multiemployer Plan," within the meaning of Section 3(37) of
ERISA.
(b) JBI has previously delivered to HUB, and included in the
JBI Disclosure Schedule, a complete and accurate copy of each of the following
with respect to each of the JBI Pension Plans and JBI 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 JBI 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 JBI 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 JBI'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 JBI or any
JBI 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 JBI Pension Plan
have been paid. All contributions required to be made to each JBI 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 JBI which have not
been paid have been properly recorded on the books of JBI .
(f) Except as disclosed in the JBI Disclosure Schedule, each
of the JBI Pension Plans, JBI Welfare Plans and each other employee benefit plan
and arrangement identified on the JBI 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 JBI Disclosure Schedule, if JBI maintains any JBI Pension Plan,
JBI has received or applied for a favorable determination letter from the IRS
which takes into account the Tax Reform Act of 1986 and (to the extent it
mandates currently applicable requirements) subsequent legislation, and JBI is
not aware of any fact or circumstance which would disqualify any plan.
(g) To the best knowledge of JBI, 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 JBI Welfare Plan or JBI Pension Plan
that would result in any material tax or penalty for JBI or any JBI Subsidiary.
(h) No JBI 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 JBI Pension Plan.
(i) No "accumulated funding deficiency," within the meaning of
Section 412 of the Code, has been incurred with respect to any JBI Pension Plan.
(j) There are no material pending, or, to the best knowledge
of JBI, material threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of, or against any of the JBI Pension Plans or the JBI
Welfare Plans, any trusts created thereunder or any other plan or arrangement
identified in the JBI Disclosure Schedule.
(k) Except as disclosed in the JBI Disclosure Schedule, no JBI
Pension Plan or JBI 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 JBI 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 JBI Financial Statements and established
in accordance with GAAP.
(m) With respect to each JBI Pension Plan and JBI Welfare Plan
that is funded wholly or partially through an insurance policy, there will be no
liability of JBI or any JBI 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 JBI Disclosure Schedule, and (ii)
as set forth in the JBI Disclosure Schedule, or as expressly agreed to by HUB in
writing either pursuant to this Agreement or otherwise, or as required by law,
the consummation of the transactions contemplated by this Agreement will not (x)
entitle any current or former employee of JBI or any JBI 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 JBI Pension Plan or JBI
Welfare Plan.
(o) Except for the JBI Pension Plans and the JBI Welfare
Plans, and except as set forth on the JBI Disclosure Schedule, JBI has no
deferred compensation agreements, understandings or obligations for payments or
benefits to any current or former director, officer or employee of JBI or any
JBI Subsidiary or any predecessor of any thereof. The JBI Disclosure Schedule
sets forth: (i) true and complete copies of the agreements, understandings or
obligations with respect to each such current or former director, officer or
employee, and (ii) the most recent actuarial or other calculation of the present
value of such payments or benefits.
(p) Except as set forth in the JBI Disclosure Schedule, JBI
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 JBI Disclosure Schedule lists each such insurance policy and
includes a copy of each agreement with a party other than the insurer with
respect to the payment, funding or assignment of such policy. To the best of JBI
`s knowledge, neither JBI nor any JBI Pension Plan or JBI 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 JBI Disclosure Schedule, JBI
does not maintain any retirement plan or retiree medical plan or arrangement for
directors. The JBI Disclosure Schedule sets forth the complete documentation and
actuarial evaluation of any such plan.
3.10. Reports.
(a) The JBI Disclosure Schedule lists each (i) final
registration statement, prospectus, annual, quarterly or current report and
definitive proxy statement filed by JBI since January 1, 1997 pursuant to the
Securities Act of 1933, as amended ("1933 Act"), or the 1934 Act and (ii)
communication (other than general advertising materials and press releases)
mailed by JBI to its shareholders as a class since January 1, 1997, and each
such communication, as of its date, complied as to form 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, 1997, (i) JBI has filed all reports that
it was required to file with the SEC under the 1934 Act, and (ii) JBI and the
Jefferson Banks each has duly filed all material forms, reports and documents
which it was required to file with each agency charged with regulating any
aspect of its business, in each case in form which was correct in all material
respects, and, subject to permission from such regulatory authorities, JBI
promptly will deliver or make available to HUB accurate and complete copies of
such reports. As of their respective dates, each such form, report, or document,
and each such final registration statement, prospectus, annual, quarterly or
current report, definitive proxy statement or communication, complied as to form
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 JBI Disclosure Schedule lists the dates of all examinations of JBI or the
Jefferson Banks conducted by the FDIC since January 1, 1997 and the dates of any
responses thereto submitted by JBI or the Jefferson Banks.
3.11. JBI and Jefferson Banks Information. The information
relating to JBI and the Jefferson Banks, this Agreement, and the transactions
contemplated hereby (except for information relating solely to HUB) to be
contained in the Joint Proxy Statement-Prospectus (as defined in Section 5.6(a)
hereof) to be delivered to shareholders of JBI and shareholders of HUB in
connection with the solicitation of their approval of the Merger, as of the date
of the mailing of the Joint Proxy Statement-Prospectus to the shareholders of
JBI and the shareholders of HUB, and up to and including the date of the
meetings of shareholders of JBI and shareholders of HUB to which such Joint
Proxy Statement-Prospectus relates, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.12. Compliance with Applicable Law. Except as set forth in
the JBI Disclosure Schedule, JBI and each JBI 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 JBI or such JBI
Subsidiary (including, without limitation, consumer, community and fair lending
laws) (other than where the failure to have a license, franchise, permit or
authorization or where such default or noncompliance will not result in a
material adverse effect on the business, operations, assets or financial
condition of JBI and the JBI Subsidiaries taken as a whole) and JBI has not
received notice of violation of, and does not know of any violations of, any of
the above.
3.13. Certain Contracts.
(a) Except for plans referenced in Section 3.9 and disclosed
in the JBI Disclosure Schedule, (i) neither JBI nor any JBI Subsidiary is a
party to or bound by any written contract or any understanding with respect to
the employment of any officers, employees, directors or consultants, and (ii)
the consummation of the transactions contemplated by this Agreement will not
(either alone or upon the occurrence of any additional acts or events) result in
any payment (whether of severance pay or otherwise) becoming due from JBI or any
JBI Subsidiary to any officer, employee, director or consultant thereof. The JBI
Disclosure Schedule sets forth true and correct copies of all severance or
employment agreements with officers, directors, employees, agents or consultants
to which JBI or any JBI Subsidiary is a party.
(b) Except as disclosed in the JBI Financial Statements, in
the SEC-filed documents referred to in Section 3.10, or in the JBI Disclosure
Schedule, and except for loan commitments, loan agreements and loan instruments
entered into or issued by the Jefferson Banks in the ordinary course of
business, (i) as of the date of this Agreement, neither JBI nor any JBI
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 JBI and the JBI Subsidiaries taken as a whole, and (ii) neither JBI
nor any JBI Subsidiary is a party to any collective bargaining agreement.
(c) Except as disclosed in the JBI Disclosure Schedule and
except for loan commitments, loan agreements and loan instruments entered into
or issued by the Jefferson Banks in the ordinary course of business, no
commitment, agreement or other instrument to which JBI or any JBI Subsidiary is
a party or by which either of them is bound limits the freedom of JBI or any JBI
Subsidiary to compete in any line of business or with any person.
(d) Except as disclosed in the JBI Disclosure Schedule,
neither JBI nor any JBI Subsidiary or, to the best knowledge of JBI, any other
party thereto, is in default in any material respect under any material lease,
contract, mortgage, promissory note, deed of trust, loan or other commitment
(except those under which the Jefferson Banks is or will be the creditor) or
arrangement, except for defaults which individually or in the aggregate would
not have a material adverse effect on the business, operations, assets or
financial condition of JBI and the JBI Subsidiaries, taken as a whole.
3.14. Properties and Insurance.
(a) Except as set forth in the JBI Disclosure Schedule, JBI or
a JBI 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 JBI's consolidated balance sheet as of December 31,
1998, 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, 1998), 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 JBI and the JBI Subsidiaries taken as a whole and (iv) with respect
to owned real property, title imperfections noted in title reports delivered to
HUB prior to the date hereof. Except as affected by the transactions
contemplated hereby, JBI or one or more of its Subsidiaries as lessees have the
right under valid and subsisting leases to occupy, use, possess and control all
real property leased by JBI and such Subsidiaries in all material respects as
presently occupied, used, possessed and controlled by JBI and its Subsidiaries.
(b) Except as set forth in the JBI Disclosure Schedule, the
business operations and all insurable properties and assets of JBI and each JBI
Subsidiary are insured for their benefit against all risks which, in the
reasonable judgment of the management of JBI, 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 JBI adequate for the business engaged in by JBI
and the JBI Subsidiaries. As of the date hereof, neither JBI nor any JBI
Subsidiary has received any notice of cancellation or notice of a material
amendment of any such insurance policy or bond or is in default under any such
policy or bond, no coverage thereunder is being disputed and all material claims
thereunder have been filed in a timely fashion. The JBI Disclosure Schedule sets
forth in summary form a list of all insurance policies of JBI and the JBI
Subsidiaries.
3.15. Minute Books. The minute books of JBI and the JBI
Subsidiaries contain records of all meetings and other corporate action held of
their respective shareholders and Boards of Directors (including committees of
their respective Boards of Directors) that are complete and accurate in all
material respects.
3.16. Environmental Matters. Except as set forth in the JBI
Disclosure Schedule:
(a) Neither JBI nor any JBI Subsidiary has received any
written notice, citation, claim, assessment, proposed assessment or demand for
abatement alleging that JBI or such JBI 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 JBI and the JBI Subsidiaries taken as a whole. JBI 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 JBI or
any JBI Subsidiary, as OREO or otherwise, or owned or controlled by JBI or any
JBI Subsidiary as a trustee or fiduciary (collectively, "Properties"), in any
manner that violates any presently existing federal, state or local law or
regulation governing or pertaining to such substances and materials, the
violation of which would have a material adverse effect on the business,
operations, assets or financial condition of JBI and the JBI Subsidiaries, taken
as a whole.
(b) JBI has no knowledge that any of the Properties has been
operated in any manner in the three years prior to the date of this Agreement
that violated any applicable federal, state or local law or regulation governing
or pertaining to toxic or hazardous substances and materials, the violation of
which would have a material adverse effect on the business, operations, assets
or financial condition of JBI and the JBI Subsidiaries taken as a whole.
(c) To the best of JBI's knowledge, JBI, each JBI Subsidiary
and any and all of their tenants or subtenants have all necessary permits and
have filed all necessary registrations material to permit the operation of the
Properties in the manner in which the operations are currently conducted under
all applicable federal, state or local environmental laws, excepting only those
permits and registrations the absence of which would not have a material adverse
effect upon the operations that require the permit or registration.
(d) To the knowledge of JBI, 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 JBI or any JBI Subsidiary.
3.17. Reserves. As of December 31, 1998, the allowance for
loan losses in the JBI Financial Statements was adequate pursuant to GAAP
(consistently applied), and the methodology used to compute the loan loss
reserve complies in all material respects with GAAP (consistently applied) and
all applicable policies of the FDIC. As of December 31, 1998, the reserve for
OREO properties (or if no reserve, the carrying value of OREO properties) in the
JBI Financial Statements was adequate pursuant to GAAP (consistently applied),
and the methodology used to compute the reserve for OREO properties (or if no
reserve, the carrying value of OREO properties) complies in all material
respects with GAAP (consistently applied) and all applicable policies of the
FDIC.
3.18. No Parachute Payments. Except as set forth in the JBI
Disclosure Schedule, no officer, director, employee or agent (or former officer,
director, employee or agent) of JBI or any JBI 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 JBI, a JBI Subsidiary, HUB or any HUB Subsidiary
which if paid or provided would constitute an "excess parachute payment", as
defined in Section 280G of the Code or regulations promulgated thereunder.
3.19. Agreements with Bank Regulators. Neither JBI nor any JBI
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 HUB by JBI prior to the date
of this Agreement, nor has JBI 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 HUB by JBI prior to the date of
this Agreement. Neither JBI nor any JBI 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 HUB by JBI prior to the date of this Agreement.
3.20. Year 2000 Compliance. JBI and the JBI Subsidiaries have
taken all reasonable steps necessary to address the software, accounting and
record keeping issues raised in order for the data processing systems used in
the business conducted by JBI and the JBI Subsidiaries to be substantially Year
2000 compliant on or before the end of 1999 and, except as set forth in the JBI
Disclosure Schedule, JBI does not expect the future cost of addressing such
issues to be material. Neither JBI nor any JBI Subsidiary has received a rating
of less than satisfactory from any bank regulatory agency with respect to Year
2000 compliance.
3.21. Accounting for the Merger: Reorganization. As of the
date hereof, after reviewing the terms of this Agreement, the stock repurchases
by JBI, the stock repurchases by HUB identified in writing to JBI, and the
employee benefit plans of JBI and the Jefferson Banks with JBI's independent
auditors, JBI does not have any reason to believe that the Merger will fail to
qualify (i) for pooling-of-interests accounting treatment under GAAP, or (ii) as
a reorganization under Section 368(a) of the Code.
3.22. Disclosure. No representation or warranty contained in
Article III of this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary to make the representations or
warranties herein not misleading in light of the circumstances under which they
were made.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF HUB
References herein to the "HUB 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 HUB to
JBI. HUB hereby represents and warrants to JBI as follows:
4.1. Corporate Organization.
(a) HUB is a corporation duly organized and validly existing
and in good standing under the laws of the State of New Jersey. HUB has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of HUB and the HUB Subsidiaries
(defined below), taken as a whole. HUB is registered as a bank holding company
under the BHCA.
(b) Each HUB Subsidiary is listed in the HUB Disclosure
Schedule. For purposes of this Agreement, the term "HUB Subsidiary" means any
corporation, partnership, joint venture or other legal entity in which HUB
directly or indirectly, owns at least a 50% stock or other equity interest or
for which HUB, 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 "HUB Subsidiary"
shall include any entity which was an HUB Subsidiary at any time during such
period. Each HUB Subsidiary is duly organized and validly existing under the
laws of the jurisdiction of its incorporation. The Bank is a state-chartered
commercial banking corporation duly organized and validly existing under the
laws of the State of New Jersey. All eligible accounts of depositors issued by
the Bank are insured by the BIF to the fullest extent permitted by law. Each HUB
Subsidiary has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not have a material adverse effect on the business, operations, assets or
financial condition of HUB and the HUB Subsidiaries, taken as a whole.
(c) The HUB Disclosure Schedule sets forth true and complete
copies of the Certificate of Incorporation and Bylaws, as in effect on the date
hereof, of HUB and the Bank.
4.2. Capitalization. The authorized capital stock of HUB
consists of 54,636,350 common shares, no par value ("HUB Common Stock"), and
10,609,000 shares of preferred stock ("HUB Authorized Preferred Stock"). As of
May 31, 1999, there were 40,633,204 shares of HUB Common Stock issued,
39,998,576 shares of HUB Common Stock outstanding, and 634,628 treasury shares,
and no shares of HUB Authorized Preferred Stock outstanding. Except as described
in the HUB Disclosure Schedule, there are no shares of HUB Common Stock issuable
upon the exercise of outstanding stock options or otherwise. All issued and
outstanding shares of HUB Common Stock and HUB Authorized Preferred Stock, and
all issued and outstanding shares of capital stock of HUB's Subsidiaries, have
been duly authorized and validly issued, are fully paid, nonassessable and free
of preemptive rights, and are free and clear of all liens, encumbrances,
charges, restrictions or rights of third parties. All of the outstanding shares
of capital stock of the HUB Subsidiaries are owned by HUB free and clear of any
liens, encumbrances, charges, restrictions or rights of third parties. Except as
described in the HUB Disclosure Schedule, neither HUB nor any HUB 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 HUB or any HUB 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, HUB 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 HUB in accordance with its
Certificate of Incorporation and applicable laws and regulations. Except for
such approvals, no other corporate proceedings on the part of HUB are necessary
to consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by HUB and constitutes a valid and binding
obligation of HUB, enforceable against HUB in accordance with its terms, except
to the extent that enforcement may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, conservatorship, receivership or other similar laws
now or hereafter in effect relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors of bank holding
companies, (ii) general equitable principles, and (iii) laws relating to the
safety and soundness of insured depository institutions and except that no
representation is made as to the effect or availability of equitable remedies or
injunctive relief..
(b) Neither the execution or delivery of this Agreement by
HUB, nor the consummation by HUB of the transactions contemplated hereby in
accordance with the terms hereof, or compliance by HUB with any of the terms or
provisions hereof will (i) violate any provision of the Certificate of
Incorporation or Bylaws of HUB, (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 HUB, any
HUB 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
HUB or any HUB Subsidiary under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which HUB is a party, or by which it or any of
their properties or assets may be bound or affected, except, with respect to
(ii) and (iii) above, such as individually or in the aggregate will not have a
material adverse effect on the business, operation, assets or financial
condition of HUB and the HUB Subsidiaries, taken as a whole, and which will not
prevent or materially delay the consummation of the transactions contemplated
hereby. Except for consents and approvals of or filings or registrations with or
notices to the FDIC, the FRB, the SEC, the New Jersey Department, the
Pennsylvania Department, or the Department of Treasury, State of New Jersey, and
the shareholders of HUB, 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 HUB in connection with (x) the execution and delivery by HUB of
this Agreement, and (y) the consummation by HUB of the Merger and the other
transactions contemplated hereby, except such as are listed in the HUB
Disclosure Schedule or in the aggregate will not (if not obtained) have a
material adverse effect on the business, operation, assets or financial
condition of HUB and the HUB Subsidiaries, taken as a whole. To the best of
HUB's knowledge, no fact or condition exists which HUB has reason to believe
will prevent it from obtaining the aforementioned consents and approvals.
4.4. Financial Statements.
(a) The HUB Disclosure Schedule sets forth copies of the
consolidated statements of financial condition of HUB as of December 31, 1997
and 1998, 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 1996 through 1998, in each case accompanied by
the audit report of Arthur Andersen, LLP, independent public accountants with
respect to HUB ("Arthur Andersen"), and the unaudited consolidated statement of
condition of HUB as of March 31, 1999 and the related unaudited consolidated
statements of income and cash flows for the three months ended March 31, 1998
and 1999, as reported in HUB's Quarterly Report on Form 10-Q, filed with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act")
(collectively, the "HUB Financial Statements"). The HUB 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 HUB 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 HUB for the respective fiscal periods set forth therein.
(b) The books and records of HUB and the HUB 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 HUB Financial Statements (including the notes thereto),
as of December 31, 1998 neither HUB nor any of the HUB Subsidiaries had any
obligation or liability, whether absolute, accrued, contingent or otherwise,
material to the business, operations, assets or financial condition of HUB or
any of the HUB Subsidiaries which were required by GAAP (consistently applied)
to be disclosed in HUB's consolidated statement of condition as of December 31,
1998 or the notes thereto. Except for the transactions contemplated by this
Agreement, and any other proposed acquisitions by HUB reflected in any Form 8-K
filed by HUB with the SEC since December 31, 1998, neither HUB nor any HUB
Subsidiary has incurred any liabilities since December 31, 1998 except in the
ordinary course of business and consistent with past practice (including for
other pending or contemplated acquisitions).
4.5. Broker's and Other Fees. Neither HUB nor any of its
directors or officers has employed any broker or finder or incurred any
liability for any broker's or finder's fees or commissions in connection with
any of the transactions contemplated by this Agreement.
4.6. Absence of Certain Changes or Events. There has not been
any HUB Material Adverse Change since December 31, 1998 and to the best of HUB's
knowledge, no facts or condition exists which HUB believes will cause a HUB
Material Adverse Change in the future. "HUB Material Adverse Change" means any
change which is material and adverse to the consolidated financial condition,
results of operations, business or assets of HUB and the HUB Subsidiaries taken
as a whole, other than (i) a change in the value of the respective investment
and loan portfolios of HUB and the HUB Subsidiaries as the result of a change in
interest rates generally, (ii) a change occurring after the date hereof in any
federal or state law, rule or regulation or in GAAP, which change affects
banking institutions generally, (iii) reasonable expenses incurred in connection
with this Agreement and the transactions contemplated hereby, (iv) changes
resulting from acquisitions by HUB or any HUB Subsidiary pending on the date
hereof or known to JBI, or (v) the entry, after the date hereof, by HUB or any
HUB Subsidiary into an agreement to acquire another entity.
4.7 Legal Proceedings. Except as disclosed in the HUB
Disclosure Schedule, and except for ordinary routine litigation incidental to
the business of HUB or its Subsidiaries, neither HUB nor any of its Subsidiaries
is a party to any, and there are no pending or, to the best of HUB's knowledge,
threatened legal, administrative, arbitral or other proceedings, claims, actions
or governmental investigations of any nature against HUB or any of its
Subsidiaries which, if decided adversely to HUB or its Subsidiaries, are
reasonably likely to have a material adverse effect on the business, operations,
assets or financial condition of HUB or its Subsidiaries, taken as a whole.
Except as disclosed in the HUB Disclosure Schedule, neither HUB nor any of its
Subsidiaries is a party to any order, judgment or decree entered in any lawsuit
or proceeding which is material to HUB or its Subsidiaries.
4.8 Reports.
(a) The HUB Disclosure Schedule lists each (i) final
registration statement, prospectus, annual, quarterly or current report and
definitive proxy statement filed by JBI since January 1, 1997 pursuant to the
1933 Act or the 1934 Act and (ii) communication (other than general advertising
materials and press releases) mailed by HUB to its shareholders as a class since
January 1, 1997, and each such communication, as of its date, complied as to
form 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, 1997, (i) HUB has filed all reports that
it was required to file with the SEC under the 1934 Act, and (ii) HUB and the
Bank each has duly filed all material forms, reports and documents which it was
required to file with each agency charged with regulating any aspect of its
business, in each case in form which was correct in all material respects, and,
subject to permission from such regulatory authorities, HUB promptly will
deliver or make available to JBI accurate and complete copies of such reports.
As of their respective dates, each such form, report, or document, and each such
final registration statement, prospectus, annual, quarterly or current report,
definitive proxy statement or communication, complied as to form 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 HUB
Disclosure Schedule lists the dates of all examinations of HUB or the Bank
conducted by the FDIC since January 1, 1997 and the dates of any responses
thereto submitted by HUB or the Bank.
4.9 HUB Information. The information relating to HUB and its
Subsidiaries (including, without limitation, information regarding other
transactions which HUB is required to disclose), this Agreement and the
transactions contemplated hereby in the Registration Statement and Joint Proxy
Statement-Prospectus (as defined in Section 5.6(a) hereof), as of the date of
the mailing of the Joint Proxy Statement-Prospectus to the shareholders of JBI
and the shareholders of HUB, and up to and including the date of the meetings of
shareholders of JBI and shareholders of HUB to which such Joint Proxy
Statement-Prospectus relates, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Registration Statement shall
comply as to form in all material respects with the provisions of the 1933 Act,
the 1934 Act and the rules and regulations promulgated thereunder.
4.10 Compliance With Applicable Law. Except as set forth in
the HUB Disclosure Schedule, each of HUB and HUB'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 HUB or HUB's Subsidiaries (including without limitation consumer, community
and fair lending laws) (other than where such default or noncompliance will not
result in a material adverse effect on the business, operations, assets or
financial condition of HUB and HUB's Subsidiaries taken as a whole) and HUB has
not received notice of violation of, and does not know of any violations of, any
of the above.
4.11 Funding and Capital Adequacy. At the Effective Time,
after giving pro forma effect to the Merger and any other acquisition which HUB
or its Subsidiaries have agreed to consummate, HUB will be deemed "well
capitalized" under prompt corrective action regulatory capital requirements.
4.12 HUB Common Stock. As of the date hereof, HUB has
available and reserved shares of HUB Common Stock sufficient for issuance
pursuant to the Merger and upon the exercise of Stock Options subsequent
thereto. The HUB Common Stock to be issued hereunder pursuant to the Merger, and
upon exercise of the Stock Options, when so issued, will be duly authorized and
validly issued, fully paid, nonassessable, free of preemptive rights and free
and clear of all liens, encumbrances or restrictions created by or through HUB,
with no personal liability attaching to the ownership thereof. The HUB Common
Stock to be issued hereunder pursuant to the Merger, and upon exercise of the
Stock Options, when so issued, will be registered under the 1933 Act and issued
in accordance with all applicable state and federal laws, rules and regulations,
and will be approved or listed for trading on the NYSE.
4.13 Agreements with Bank Regulators. Neither HUB nor any HUB
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 JBI by HUB prior to the date of this Agreement, nor has HUB 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 JBI by HUB prior to the date of this Agreement. Neither HUB nor
any HUB 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 JBI by HUB prior to
the date of this Agreement.
4.14 Taxes and Tax Returns.
(a) HUB and HUB's subsidiaries have duly filed (and until the
Effective Time will so file) all Returns required to be filed by them in respect
of any federal, state and local taxes (including withholding taxes, penalties or
other payments required) and have duly paid (and until the Effective Time will
so pay) all such taxes due and payable, other than taxes or other charges which
are being contested in good faith (and disclosed to JBI in writing). HUB and
HUB's subsidiaries have established on their books and records reserves that are
adequate for the payment of all federal, state and local taxes not yet due and
payable, but are incurred in respect of HUB through such date. The HUB
Disclosure Schedule identifies the federal income tax returns of HUB and its
Subsidiaries which have been examined by the IRS within the past six years. No
deficiencies were asserted as a result of such examinations which have not been
resolved and paid in full. The HUB Disclosure Schedule identifies the applicable
state income tax returns of HUB and its Subsidiaries which have been examined by
the applicable authorities. No deficiencies were asserted as a result of such
examinations which have not been resolved and paid in full. To the best
knowledge of HUB, 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 HUB or its Subsidiaries, nor has
HUB or its Subsidiaries given any currently outstanding waivers or comparable
consents regarding the application of the statute of limitations with respect to
any taxes or Returns.
(b) Except as set forth in the HUB Disclosure Schedule,
neither HUB nor any Subsidiary of HUB (i) has requested any extension of time
within which to file any Return which Return has not since been filed, (ii) is a
party to any agreement providing for the allocation or sharing of taxes, (iii)
is required to include in income any adjustment pursuant to Section 481(a) of
the Code, by reason of a voluntary change in accounting method initiated by HUB
or any of its Subsidiaries (nor does HUB have any knowledge that the IRS has
proposed any such adjustment or change of accounting method) or (iv) has filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply.
4.15 Employee Benefit Plans.
(a) Except as set forth on the HUB Disclosure Schedule,
neither HUB nor any HUB Subsidiary maintains or contributes to any "employee
pension benefit plan" (the "HUB Pension Plans") within the meaning of such term
in Section 3(2)(A) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), "employee welfare benefit plan" (the "HUB Welfare Plans")
within the meaning of such term in Section 3(1) of ERISA, stock option plan,
stock purchase plan, deferred compensation plan, severance plan, bonus plan,
employment agreement, director retirement program or other similar plan, program
or arrangement. Neither HUB nor any HUB Subsidiary has, since September 2, 1974,
contributed to any "Multiemployer Plan," within the meaning of Section 3(37) of
ERISA.
(b) HUB has previously delivered to JBI, and included in the
HUB Disclosure Schedule, a complete and accurate copy of each of the following
with respect to each of the HUB Pension Plans and HUB 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 HUB 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 HUB 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 HUB' 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 PBGC has not asserted any
claim for liability against HUB or any HUB 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 HUB Pension Plan
have been paid. All contributions required to be made to each HUB 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 HUB which have not
been paid have been properly recorded on the books of HUB .
(f) Except as disclosed in the HUB Disclosure Schedule, each
of the HUB Pension Plans, HUB Welfare Plans and each other employee benefit plan
and arrangement identified on the HUB 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 HUB Disclosure Schedule, if HUB maintains any HUB Pension Plan,
HUB has received or applied for a favorable determination letter from the IRS
which takes into account the Tax Reform Act of 1986 and (to the extent it
mandates currently applicable requirements) subsequent legislation, and HUB is
not aware of any fact or circumstance which would disqualify any plan.
(g) To the best knowledge of HUB, 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 HUB Welfare Plan or HUB Pension Plan
that would result in any material tax or penalty for HUB or any HUB Subsidiary.
(h) No HUB 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 HUB Pension Plan.
(i) No "accumulated funding deficiency," within the meaning of
Section 412 of the Code, has been incurred with respect to any HUB Pension Plan.
(j) There are no material pending, or, to the best knowledge
of HUB, material threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of, or against any of the HUB Pension Plans or the HUB
Welfare Plans, any trusts created thereunder or any other plan or arrangement
identified in the HUB Disclosure Schedule.
(k) Except as disclosed in the HUB Disclosure Schedule, no HUB
Pension Plan or HUB 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 HUB 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 HUB Financial Statements and established
in accordance with GAAP.
(m) With respect to each HUB Pension Plan and HUB Welfare Plan
that is funded wholly or partially through an insurance policy, there will be no
liability of HUB or any HUB 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 HUB Disclosure Schedule, and (ii)
as set forth in the HUB Disclosure Schedule, or as expressly agreed to by HUB in
writing either pursuant to this Agreement or otherwise, or as required by law,
the consummation of the transactions contemplated by this Agreement will not (x)
entitle any current or former employee of HUB or any HUB 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 HUB Pension Plan or HUB
Welfare Plan.
(o) Except for the HUB Pension Plans and the HUB Welfare
Plans, and except as set forth on the HUB Disclosure Schedule, HUB has no
deferred compensation agreements, understandings or obligations for payments or
benefits to any current or former director, officer or employee of HUB or any
HUB Subsidiary or any predecessor of any thereof. The HUB Disclosure Schedule
sets forth: (i) true and complete copies of the agreements, understandings or
obligations with respect to each such current or former director, officer or
employee, and (ii) the most recent actuarial or other calculation of the present
value of such payments or benefits.
(p) Except as set forth in the HUB Disclosure Schedule, HUB
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 HUB Disclosure Schedule lists each such insurance policy and
includes a copy of each agreement with a party other than the insurer with
respect to the payment, funding or assignment of such policy. To the best of HUB
`s knowledge, neither HUB nor any HUB Pension Plan or HUB 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 HUB Disclosure Schedule, HUB
does not maintain any retirement plan or retiree medical plan or arrangement for
directors. The HUB Disclosure Schedule sets forth the complete documentation and
actuarial evaluation of any such plan.
4.16 Contracts.
(a) Except as disclosed in the HUB Disclosure Schedule,
neither HUB nor any of its Subsidiaries, or to the best knowledge of HUB, any
other party thereto, is in default in any material respect under any material
lease, contract, mortgage, promissory note, deed of trust, loan or other
commitment (except those under which a banking subsidiary of HUB is or will be
the creditor) or arrangement, except for defaults which individually or in the
aggregate would not have a material adverse effect on the business, operations,
assets or financial condition of HUB and its subsidiaries, taken as a whole.
(b) Except as disclosed in the HUB Financial Statements, in
the SEC-filed documents referred to in Section 4.8, or in the HUB Disclosure
Schedule, and except for loan commitments, loan agreements and loan instruments
entered into or issued by the Bank in the ordinary course of business, (i) as of
the date of this Agreement, neither HUB nor any HUB 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 HUB and the HUB
Subsidiaries taken as a whole, and (ii) neither HUB nor any HUB Subsidiary is a
party to any collective bargaining agreement.
(c) Except as disclosed in the HUB Disclosure Schedule and
except for loan commitments, loan agreements and loan instruments entered into
or issued by the Bank in the ordinary course of business, no commitment,
agreement or other instrument to which HUB or any HUB Subsidiary is a party or
by which either of them is bound limits the freedom of HUB or any HUB Subsidiary
to compete in any line of business or with any person.
4.17 Properties and Insurance.
(a) HUB and its Subsidiaries have good and, as to owned real
property, marketable title to all material assets and properties, whether real
or personal, tangible or intangible, reflected in HUB's consolidated balance
sheet as of December 31, 1998, 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, 1998), 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 HUB and its subsidiaries taken as
a whole and (iv) with respect to owned real property, title imperfections noted
in title reports. Except as disclosed in the HUB Disclosure Schedule, HUB and
its Subsidiaries as lessees have the right under valid and subsisting leases to
occupy, use, possess and control all property leased by HUB or its Subsidiaries
in all material respects as presently occupied, used, possessed and controlled
by HUB and its Subsidiaries.
(b) The business operations and all insurable properties and
assets of HUB and its Subsidiaries are insured for their benefit against all
risks which, in the reasonable judgment of the management of HUB, 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 HUB adequate
for the business engaged in by HUB and its Subsidiaries. As of the date hereof,
neither HUB nor any of its Subsidiaries has received any notice of cancellation
or notice of a material amendment of any such insurance policy or bond or is in
default under any such policy or bond, no coverage thereunder is being disputed
and all material claims thereunder have been filed in a timely fashion.
4.18. Environmental Matters. Except as disclosed in the HUB
Disclosure Schedule, neither HUB nor any of its Subsidiaries has received any
written notice, citation, claim, assessment, proposed assessment or demand for
abatement alleging that HUB or any of its Subsidiaries (either directly or as a
successor-in-interest in connection with the enforcement of remedies to realize
the value of properties serving as collateral for outstanding loans) is
responsible for the correction or cleanup of any condition resulting from the
violation of any law, ordinance or other governmental regulation regarding
environmental matters which correction or cleanup would be material to the
business, operations, assets or financial condition of HUB and its Subsidiaries
taken as a whole. Except as disclosed in the HUB Disclosure Schedule, HUB 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
HUB or any of its subsidiaries in any manner that violates or, after the lapse
of time is reasonably likely to violate, any presently existing federal, state
or local law or regulation governing or pertaining to such substances and
materials, the violation of which would have a material adverse effect on the
business, operations, assets or financial condition of HUB and its Subsidiaries,
taken as a whole.
4.19 Reserves. As of December 31, 1998, the allowance for
possible loan losses in the HUB Financial Statements was adequate pursuant to
GAAP (consistently applied), and the methodology used to compute the allowance
for possible loan losses complies in all material respects with GAAP
(consistently applied) and all applicable policies of the FDIC. As of December
31, 1998, the valuation allowance for OREO properties in the HUB Financial
Statements was adequate pursuant to GAAP (consistently applied), and the
methodology used to compute the valuation allowance for OREO properties complies
in all material respects with GAAP (consistently applied), and all applicable
policies of the FDIC.
4.20. Year 2000 Compliance. HUB and the HUB Subsidiaries have
taken all reasonable steps necessary to address the software, accounting and
record keeping issues raised in order for the data processing systems used in
the business conducted by HUB and the HUB Subsidiaries to be substantially Year
2000 compliant on or before the end of 1999 and HUB does not expect the future
cost of addressing such issues to be material. Neither HUB nor any HUB
Subsidiary has received a rating of less than satisfactory from any bank
regulatory agency with respect to Year 2000 compliance.
4.21 Accounting for the Merger; Reorganization. As of the date
hereof, after reviewing the terms of this Agreement, the stock repurchases by
HUB, the stock repurchases by JBI identified in writing to HUB, and the employee
benefit plans of JBI and the Jefferson Banks with HUB's independent auditors,
HUB does not have any reason to believe that the Merger will fail to qualify (i)
for pooling-of-interests treatment under GAAP, or (ii) as a reorganization under
Section 368(a) of the Code. As of the date hereof, neither HUB nor any HUB
Subsidiary owns any shares of JBI Common Stock.
4.22 Disclosure. No representation or warranty contained in
Article IV of this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary to make the representations or
warranties herein not misleading in light of the circumstances under which they
were made.
ARTICLE V - COVENANTS OF THE PARTIES
5.1. Conduct of the Business of JBI. During the period from
the date of this Agreement to the Effective Time, JBI and the Jefferson Banks
shall, and shall cause each JBI Subsidiary to, conduct their respective
businesses only in the ordinary course and consistent with prudent business
practice, except for transactions permitted hereunder or with the prior written
consent of HUB, which consent will not be unreasonably withheld. Each of JBI and
the Jefferson Banks also shall use its reasonable best efforts to (i) preserve
its business organization and that of the JBI Subsidiaries intact, (ii) keep
available to itself and the JBI Subsidiaries the present services of their
respective employees, and (iii) preserve for itself and HUB the goodwill of its
customers and those of the JBI Subsidiaries and others with whom business
relationships exist.
5.2. Negative Covenants. From the date hereof to the Effective
Time, except as otherwise approved by HUB in writing, or as set forth in the JBI
Disclosure Schedule, or as permitted or required by this Agreement, neither JBI
nor any of the Jefferson Banks will:
(a) change any provision of its Certificate of Incorporation
or any similar governing documents;
(b) change any provision of its Bylaws without the consent of
HUB which consent shall not be unreasonably withheld;
(c) change the number of shares of its authorized or issued
capital stock (other than upon exercise of stock options or warrants
described on the JBI 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 other than its
regular quarterly cash dividend in the amount of $0.62 per share per
quarter; provided, however, that nothing contained herein shall be
deemed to affect the ability of the Jefferson Banks to pay dividends on
their capital stock to JBI;
(d) grant any severance or termination pay (other than
pursuant to policies or contracts of JBI in effect on the date hereof
and disclosed to HUB in the JBI Disclosure Schedule) to, or enter into
or amend any employment or severance agreement with, any of its
directors, officers or employees; adopt any new employee benefit plan
or arrangement of any type; or award any increase in compensation or
benefits to its directors, officers or employees except in each case
(i) as required by law or (ii) as specified in Section 5.2 of the JBI
Disclosure Schedule;
(e) sell or dispose of any substantial amount of assets or
voluntarily incur any significant liabilities other than in the
ordinary course of business consistent with past practices and policies
or in response to substantial financial demands upon the business of
JBI or the Jefferson Banks;
(f) make any capital expenditures in excess of $50,000 in the
aggregate, other than pursuant to binding commitments existing on the
date hereof, expenditures necessary to maintain existing assets in good
repair and expenditures described in business plans or budgets
previously furnished to HUB, except as set forth in Section 5.2 of the
JBI Disclosure Schedule;
(g) file any applications or make any contract with respect to
branching or site location or relocation;
(h) agree to acquire in any manner whatsoever (other than to
realize upon collateral for a defaulted loan) any business or entity or
make any new investments in securities other than investments in
government, municipal or agency bonds having a maturity of less than
five years;
(i) make any material change in its accounting methods or
practices, other than changes required in accordance with generally
accepted accounting principles or regulatory authorities;
(j) take any action that would result in any of its
representations and warranties contained in Article III of this
Agreement not being true and correct in any material respect at the
Effective Time or that would cause any of its conditions to Closing not
to be satisfied;
(k) without first conferring with HUB, make or commit to make
any new loan or new extension of credit in an amount of $5,000,000 or
more, except such loan initiations that are committed as of the date of
this Agreement and identified on the JBI Disclosure Schedule and
residential mortgage loans made in the ordinary course of business in
accordance with past practice; or
(l) agree to do any of the foregoing.
5.3. No Solicitation. So long as this Agreement remains in
effect, JBI and the Jefferson Banks 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 HUB) 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 JBI or either
of the Jefferson Banks (an "Acquisition Transaction"). Notwithstanding the
foregoing, JBI may enter into discussions or negotiations or provide information
in connection with an unsolicited possible Acquisition Transaction if the Board
of Directors of JBI, 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. JBI shall promptly
communicate to HUB the terms of any proposal, whether written or oral, which it
may receive in respect of any such Acquisition Transaction and the fact that it
is having discussions or negotiations with a third party about an Acquisition
Transaction.
5.4. Current Information. During the period from the date of
this Agreement to the Effective Time, each of JBI and HUB 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, JBI
agrees to provide HUB, and HUB agrees to provide JBI, with internally prepared
profit and loss statements no later than 25 days after the close of each
calendar month. As soon as reasonably available, but in no event more than 45
days after the end of each fiscal quarter (other than the last fiscal quarter of
each fiscal year), JBI will deliver to HUB and HUB will deliver to JBI 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, JBI will deliver to HUB and HUB will deliver to
JBI 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) JBI and the Jefferson Banks shall permit HUB and its
representatives, and HUB shall permit, and cause each HUB Subsidiary to permit,
JBI and its representatives, reasonable access to their respective properties,
and shall disclose and make available to HUB and its representatives, or JBI and
its representatives as the case may be, all books, papers and records relating
to its assets, stock ownership, properties, operations, obligations and
liabilities, including, but not limited to, all books of account (including the
general ledger), tax records, minute books of directors' and shareholders'
meetings, organizational documents, Bylaws, material contracts and agreements,
filings with any regulatory authority, accountants' work papers, litigation
files, plans affecting employees, and any other business activities or prospects
in which HUB and its representatives or JBI 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, JBI acknowledges that
HUB may be involved in discussions concerning other potential acquisitions and
HUB shall not be obligated to disclose such information to JBI except as such
information is disclosed to HUB's shareholders generally.
(b) All information furnished by the parties hereto previously
in connection with transactions contemplated by this Agreement or pursuant
hereto shall be used solely for the purpose of evaluating the Merger
contemplated hereby and shall be treated as the sole property of the party
delivering the information until consummation of the Merger contemplated hereby
and, if such Merger shall not occur, each party and each party's advisors shall
return to the other party all documents or other materials containing,
reflecting or referring to such information, will not retain any copies of such
information, shall use its reasonable best efforts to keep confidential all such
information, and shall not directly or indirectly use such information for any
competitive or other commercial purposes. In the event that the Merger
contemplated hereby does not occur, all documents, notes and other writings
prepared by a party hereto or its advisors based on information furnished by the
other party shall be promptly destroyed. The obligation to keep such information
confidential shall continue for five years from the date the proposed Merger is
abandoned but shall not apply to (i) any information which (A) the party
receiving the information can establish by convincing evidence was already in
its possession prior to the disclosure thereof to it by the other party; (B) was
then generally known to the public; (C) became known to the public through no
fault of the party receiving such information; or (D) was disclosed to the party
receiving such information by a third party not bound by an obligation of
confidentiality; or (ii) disclosures pursuant to a legal requirement or in
accordance with an order of a court of competent jurisdiction.
5.6. Regulatory Matters.
(a) For the purposes of holding the Shareholders Meetings (as
referred to in Section 5.7 hereof), and qualifying under applicable federal and
state securities laws the HUB Common Stock to be issued to JBI shareholders in
connection with the Merger, the parties hereto shall cooperate in the
preparation and filing by HUB with the SEC of a Registration Statement including
a joint 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 JBI and HUB to their
respective shareholders together with any and all amendments or supplements
thereto, being herein referred to as the "Joint Proxy Statement-Prospectus" and
the various documents to be filed by HUB under the 1933 Act with the SEC to
register the HUB Common Stock for sale, including the Joint Proxy
Statement-Prospectus, are referred to herein as the "Registration Statement").
(b) HUB shall furnish JBI with such information concerning HUB
and its Subsidiaries (including, without limitation, information regarding other
transactions which HUB is required to disclose) as is necessary in order to
cause the Joint Proxy Statement-Prospectus, insofar as it relates to such
corporations, to comply with Section 5.6(a) hereof. HUB agrees promptly to
advise JBI if at any time prior to the Shareholders' Meetings any information
provided by HUB in the Joint Proxy Statement-Prospectus becomes incorrect or
incomplete in any material respect and promptly to provide JBI with the
information needed to correct such inaccuracy or omission. HUB shall promptly
furnish JBI with such supplemental information as may be necessary in order to
cause the Joint Proxy Statement-Prospectus, insofar as it relates to HUB and the
HUB Subsidiaries, to comply with Section 5.6(a) after the mailing thereof to the
parties' respective shareholders.
(c) JBI shall furnish HUB with such information concerning JBI
as is necessary in order to cause the Joint Proxy Statement-Prospectus, insofar
as it relates to JBI, to comply with Section 5.6(a) hereof. JBI agrees promptly
to advise HUB if at any time prior to the Shareholders' Meetings, any
information provided by JBI in the Joint Proxy Statement-Prospectus becomes
incorrect or incomplete in any material respect and promptly to provide HUB with
the information needed to correct such inaccuracy or omission. JBI shall
promptly furnish HUB with such supplemental information as may be necessary in
order to cause the Joint Proxy Statement-Prospectus, insofar as it relates to
JBI and the Jefferson Banks to comply with Section 5.6(a) after the mailing
thereof to the parties' respective shareholders.
(d) HUB shall as promptly as practicable make such filings as
are necessary in connection with the offering of the HUB Common Stock with
applicable state securities agencies and shall use all reasonable efforts to
qualify the offering of such stock under applicable state securities laws at the
earliest practicable date. JBI shall promptly furnish HUB with such information
regarding the JBI shareholders as HUB requires to enable it to determine what
filings are required hereunder. JBI authorizes HUB to utilize in such filings
the information concerning JBI and the Jefferson Banks provided to HUB in
connection with, or contained in, the Joint Proxy Statement-Prospectus. HUB
shall furnish JBI's counsel with copies of all such filings and keep JBI advised
of the status thereof. HUB and JBI shall as promptly as practicable file the
Registration Statement containing the Joint Proxy Statement-Prospectus with the
SEC, and each of HUB and JBI shall promptly notify the other of all
communications, oral or written, with the SEC concerning the Registration
Statement and the Joint Proxy Statement-Prospectus.
(e) HUB shall cause the HUB Common Stock issuable pursuant to
the Merger to be listed on the NYSE at the Effective Time. HUB shall cause the
HUB Common Stock which shall be issuable pursuant to exercise of Stock Options
to be accepted for listing on the NYSE when issued.
(f) The parties hereto will cooperate with each other and use
their reasonable best efforts to prepare all necessary documentation, to effect
all necessary filings and to obtain all necessary permits, consents, approvals
and authorizations of all third parties and Governmental Entities necessary to
consummate the transactions contemplated by this Agreement as soon as possible,
including, without limitation, those required by the FDIC, the FRB, the New
Jersey Department, the Pennsylvania Department and (if required) the NJDEP and
PDEP. Without limiting the foregoing, the parties shall use reasonable business
efforts to file for approval or waiver by the appropriate bank regulatory
agencies within 45 days after the date hereof. The parties shall each have the
right to review in advance (and shall do so promptly) all filings with,
including all information relating to the other, as the case may be, and any of
their respective subsidiaries, which appears in any filing made with, or written
material submitted to, any third party or Governmental Entity in connection with
the transactions contemplated by this Agreement.
(g) Each of the parties will promptly furnish each other with
copies of written communications received by them or any of their respective
subsidiaries from, or delivered by any of the foregoing to, any Governmental
Entity in respect of the transactions contemplated hereby.
(h) JBI acknowledges that HUB is in or may be in the process
of acquiring other banks and financial institutions and that in connection with
such acquisitions, information concerning JBI may be required to be included in
the registration statements, if any, for the sale of securities of HUB or in SEC
reports in connection with such acquisitions. JBI agrees to provide HUB with any
information, certificates, documents or other materials about JBI as are
reasonably necessary to be included in such other SEC reports or registration
statements, including registration statements which may be filed by HUB prior to
the Effective Time. JBI shall use its reasonable efforts to cause its attorneys
and accountants to provide HUB and any underwriters for HUB 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. HUB shall reimburse JBI for reasonable expenses thus
incurred by JBI should this transaction be terminated for any reason. HUB shall
not file with the SEC any registration statement or amendment thereto or
supplement thereof containing information regarding JBI unless JBI shall have
consented in writing to such filing, which consent shall not be unreasonably
delayed or withheld.
5.7. Approval of Shareholders.
(a) JBI will (i) take all steps necessary duly to call, give
notice of, convene and hold a meeting of the shareholders of JBI (the "JBI
Shareholders Meeting") for the purpose of securing the approval of shareholders
of this Agreement, (ii) subject to the qualification set forth in Section 5.3
hereof and the right not to make a recommendation or to withdraw a
recommendation if JBI's Board of Directors, after consulting with counsel,
determines in the exercise of its fiduciary duties that such recommendation
should not be made or should be withdrawn, recommend to the shareholders of JBI
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 HUB with respect to each of the
foregoing matters.
(b) HUB will (i) take all steps necessary duly to call, give
notice of, convene and hold a meeting of the shareholders of HUB (the "HUB
Shareholders Meeting") for the purpose of securing the approval of shareholders
of this Agreement, (ii) recommend to the shareholders of HUB 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 JBI with respect to each of the foregoing matters.
5.8. Further Assurances.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to satisfy
the conditions to Closing and to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, using reasonable
efforts to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated by this Agreement and using its reasonable best efforts to prevent
the breach of any representation, warranty, covenant or agreement of such party
contained or referred to in this Agreement and to promptly remedy the same. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
Nothing in this section shall be construed to require any party to participate
in any threatened or actual legal, administrative or other proceedings (other
than proceedings, actions or investigations to which it is a party or subject or
threatened to be made a party or subject) in connection with consummation of the
transactions contemplated by this Agreement unless such party shall consent in
advance and in writing to such participation and the other party agrees to
reimburse and indemnify such party for and against any and all costs and damages
related thereto if the Merger is not consummated.
(b) HUB agrees that from the date hereof to the Effective
Time, except as otherwise approved by JBI in writing or as permitted or required
by this Agreement, HUB will use reasonable business efforts to maintain and
preserve intact its business organization, properties, leases, employees and
advantageous business relationships, and HUB will not, nor will it permit any
HUB Subsidiary to, take any action: (i) that would result in any of its
representations and warranties contained in Article IV of this Agreement not
being true and correct in any material respect at, or prior to, the Effective
Time, or (ii) that would cause any of its conditions to Closing not to be
satisfied, or (iii) that would constitute a breach or default of its obligations
under this Agreement, or (iv) to declare, set aside, make or pay any
extraordinary cash dividend in excess of $0.05 per share of HUB Common Stock, or
(v) to enter into any agreement after the date hereof with respect to one or
more acquisitions that, individually or in the aggregate, can reasonably be
expected to materially adversely affect the ability of HUB to consummate the
Merger prior to the Cutoff Date (as such term is hereinafter defined), or (vi)
to agree to do any of the foregoing.
(c) HUB, the Bank, JBI and the Jefferson Banks will use
reasonable efforts to cause the Merger to occur on or before November 30, 1999.
5.9. Public Announcements. HUB and JBI 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 HUB and JBI agree that unless approved
mutually by them in advance, they will not issue any press release or written
statement for general circulation relating primarily to the transactions
contemplated hereby, except as may be otherwise required by law or regulation
upon the advice of counsel.
5.10. Failure to Fulfill Conditions. In the event that HUB or
JBI determines that a material condition to its obligation to consummate the
transactions contemplated hereby cannot be fulfilled on or prior to April 30,
2000 (the "Cutoff Date") and that it will not waive that condition, it will
promptly notify the other party. Except for any acquisition or merger
discussions HUB may enter into with other parties, JBI and HUB will promptly
inform the other of any facts applicable to JBI or HUB, 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, HUB agrees with JBI
to honor the existing written employment and severance contracts with officers
and employees of JBI and Jefferson Banks that are included in the JBI Disclosure
Schedule, and to institute for key employees the compensation and incentive
structure described on Schedule 5.11(a) of the HUB Disclosure Schedule.
(b) Following consummation of the Merger, HUB will decide
whether to continue each of the Jefferson Banks and/or JBI's pension and welfare
plans for the benefit of employees of the Jefferson Banks and JBI, or to have
such employees become covered under a HUB Pension and Welfare Plan. If HUB
decides to cover Jefferson Banks and JBI employees under a HUB Pension and
Welfare Plan, such employees will receive credit for prior years of service with
the Jefferson Banks and/or JBI for purposes of determining eligibility to
participate, and vesting, if applicable. No prior existing condition limitation
shall be imposed with respect to any medical coverage plan as a result of the
Merger.
(c) Any person who was serving as an employee of either JBI or
the Jefferson Banks immediately prior to the Effective Time (other than those
employees covered by either a written employment agreement or the arrangements
set forth in Section 5.11 of the JBI Disclosure Schedule) whose employment is
discontinued by HUB or the Bank or any of the HUB Subsidiaries within six months
after the Effective Time (unless termination of such employment is for Cause (as
defined below)) shall be entitled to a severance payment from the Bank equal in
amount to one week's base pay for each full year such employee was employed by
JBI or the Jefferson Banks or any successor or predecessor thereto or other JBI
Subsidiary, subject to a minimum of two weeks' severance and a maximum of 26
weeks' severance, together with any accrued but unused vacation leave with
respect to the calendar year in which termination occurs. For purposes of this
Section 5.11, "Cause" shall mean termination because of the employee's personal
dishonesty, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties or willful violation of any
law, rule, or regulation (other than traffic violations or similar offenses).
Following the expiration of the foregoing severance policy, any years of service
recognized for purposes of this Section 5.11(c) will be taken into account under
the terms of any applicable severance policy of HUB.
(d) Employees of JBI and the Jefferson Banks who become
employees of HUB or any HUB Subsidiary shall become entitled to participate in
HUB's defined benefit pension plan in accordance with its terms. In this regard,
each such employee shall (i) receive, for purposes of participation and vesting
only, credit for all service with JBI or the Jefferson Banks and (ii) enter the
HUB defined benefit pension plan on the entry date concurrent with or next
following the employee's satisfaction of such plan's minimum participation
requirements.
(e) Employees of JBI and the Jefferson Banks who become
employees of HUB or any HUB Subsidiary shall become entitled to participate in
the applicable HUB retirement savings plan ("401(k) Plan") in accordance with
its terms. In this regard, each such employee shall (i) receive, for purposes of
participation and vesting only, credit for all service with JBI or the Jefferson
Banks, and (ii) enter the applicable 401(k) Plan on the entry date concurrent
with or next following the employee's satisfaction of such plan's minimum
participation requirements.
(f) JBI and the Jefferson Banks may continue to administer
such bonus programs and arrangements as are disclosed pursuant to this Agreement
through the Effective Time, provided that bonuses shall be paid only to the
extent they have been previously accrued and their payment will not cause JBI's
earnings to fall below budgeted amounts.
(g) Within ninety (90) days after the date hereof, HUB and the
Bank shall use their reasonable best efforts to inform the employees of JBI and
the Jefferson Banks of the likelihood of such employees having continued
employment with HUB or a HUB Subsidiary following the Effective Time and, where
appropriate, shall use their reasonable best efforts to interview the JBI and
Jefferson Banks employees to determine if there are mutually beneficial
employment opportunities available at HUB or a HUB Subsidiary. It is the intent
of HUB and the Bank in connection with reviewing applicants for employment
positions to give any JBI and Jefferson Banks employee who is terminated for
other than Cause within six (6) months following the Effective Time the same
consideration as is afforded the Bank employees for such positions in accordance
with existing formal or informal polices for a period of six (6) months from
such date of termination.
(h) Each employee of JBI or the Jefferson Banks identified in
Section 5.11 of the JBI Disclosure Schedule shall be entitled to receive a
"retention" bonus from JBI or the Jefferson Banks in the amount set forth in
Section 5.11 of the JBI Disclosure Schedule in the event that such employee
remains an employee of JBI or the Jefferson Banks, as applicable until the
fifteenth day following successful completion of the conversion of the Jefferson
Banks' computer systems to those of the Bank, and satisfactorily fulfills the
duties and responsibilities of the position of such employee of JBI or the
Jefferson Banks, as the case may be, through such time; provided that retention
bonuses, in the aggregate, shall not exceed $500,000.
(i) HUB shall pay the cost of out-placement services for
employees who are terminated without Cause in connection with the Merger within
six (6) months after the Effective Time. HUB shall not be obligated to pay any
out-placement fees in connection with the foregoing or more than $50,000 in the
aggregate for such services.
5.12. Disclosure Supplements. From time to time prior to the
Effective Time, each party hereto will promptly supplement or amend (by written
notice to the other) its respective Disclosure Schedules delivered pursuant
hereto with respect to any matter hereafter arising which, if existing,
occurring or known at the date of this Agreement, would have been required to be
set forth or described in such Schedules or which is necessary to correct any
information in such Schedules which has been rendered materially inaccurate
thereby. For the purpose of determining satisfaction of the conditions set forth
in Article VI and subject to Sections 6.2(a) and 6.3(a), no supplement or
amendment to the parties' respective Disclosure Schedules which corrects any
representation or warranty which was untrue when made shall eliminate the other
party's right (if any) to terminate this Agreement based on the original untruth
of the representation or warranty; provided, that the other party shall be
deemed to have waived such right if it does not exercise such right within 15
days after receiving the correcting supplement or amendment.
5.13. Transaction Expenses of JBI.
(a) For planning purposes, JBI shall, within 30 days from the
date hereof, provide HUB with its estimated budget of transaction-related
expenses reasonably anticipated to be payable by JBI in connection with this
transaction based on facts and circumstances then currently known, including the
fees and expenses of counsel, accountants, investment bankers and other
professionals. JBI shall promptly notify HUB if or when it determines that it
will expect to exceed its budget.
(b) Promptly after the execution of this Agreement, JBI shall
ask all of its attorneys and other professionals to render current and correct
invoices for all unbilled time and disbursements. JBI shall accrue and/or pay
all of such amounts as soon as possible.
(c) JBI shall cause its professionals to render monthly
invoices within 15 days after the end of each month. JBI shall advise HUB
monthly of all out-of-pocket expenses which JBI has incurred in connection with
this transaction.
(d) HUB, in reasonable consultation with JBI, shall make all
arrangements with respect to the printing and mailing of the Joint Proxy
Statement-Prospectus.
5.14 Indemnification.
(a) For a period of six years after the Effective Time, HUB
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 JBI or the Jefferson Banks or serves or
has served at the request of JBI or the Jefferson Banks 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 JBI or the Jefferson Banks
or serves or has served at the request of JBI or the Jefferson Banks 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 JBI or the Jefferson Banks or any
of their respective affiliates, or by any former or present shareholder of JBI
(each a "Claim" and collectively, "Claims"), including, without limitation, any
Claim which is based upon, arises out of or in any way relates to the Merger,
the Proxy Statement/Prospectus, this Agreement, any of the transactions
contemplated by this Agreement, the Indemnitee's service as a member of the
Board of Directors of JBI or the Jefferson Banks or of any committee of JBI's or
the Jefferson Banks' 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 HUB set
forth in this Section 5.14, in each case to the fullest extent which JBI or the
Jefferson Banks would have been permitted under any applicable law and their
respective Certificates of Incorporation or Bylaws had the Merger not occurred
(and HUB shall also advance expenses as incurred to the fullest extent so
permitted). Notwithstanding the foregoing, but subject to subsection (b) below,
HUB shall not provide any indemnification or advance any expenses with respect
to any Claim which relates to a personal benefit improperly paid or provided, or
alleged to have been improperly paid or provided, to the Indemnitee, but HUB
shall reimburse the Indemnitee for costs incurred by the Indemnitee with respect
to such Claim when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and nonappealable,
that the Indemnitee was not improperly paid or provided with the personal
benefit alleged in the Claim.
(b) From and after the Effective Time, HUB shall assume and
honor any obligation of JBI or the Jefferson Banks immediately prior to the
Effective Time with respect to the indemnification of the Indemnitees arising
out of the Certificate of Incorporation or Bylaws of JBI or the Jefferson Banks,
or arising out of any written indemnification agreements between JBI and/or the
Jefferson Banks and such persons disclosed in the JBI Disclosure Schedule, as if
such obligations were pursuant to a contract or arrangement between HUB and such
Indemnitees.
(c) In the event HUB 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 HUB assume the obligations set forth in this Section 5.14.
(d) HUB shall cause JBI's and the Jefferson Banks' officers
and directors to be covered under HUB'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 JBI's and the
Jefferson Banks' existing officers' and directors' liability insurance policy.
However, HUB shall only be required to insure such persons upon terms and for
coverages substantially similar to JBI's and the Jefferson Banks' existing
officers' and directors' liability insurance.
(e) Any Indemnitee wishing to claim indemnification under this
Section 5.14 shall promptly notify HUB upon learning of any Claim, but the
failure to so notify shall not relieve HUB of any liability it may have to such
Indemnitee if such failure does not materially prejudice HUB. 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) HUB shall have the
right to assume the defense thereof and HUB 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 HUB elects not to assume such defense, or counsel for the
Indemnitees advises that there are issues which raise conflicts of interest
between HUB and the Indemnitees, the Indemnitees may retain counsel satisfactory
to them, and HUB shall pay the reasonable fees and expenses of such counsel for
the Indemnitees as statements therefor are received; provided, however, that HUB
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. HUB 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, HUB 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 Mergers. Notwithstanding that JBI
believes that it has established all reserves and taken all provisions for
possible loan losses required by GAAP and applicable laws, rules and
regulations, JBI recognizes that HUB 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
Mergers, JBI and HUB shall consult and cooperate with each other with respect to
(i) conforming to the extent appropriate, based upon such consultation, JBI's
loan, accrual and reserve policies and JBI's other policies and procedures
regarding applicable regulatory matters, including without limitation Federal
Reserve, the Bank Secrecy Act and FDIC matters, to those policies of HUB as HUB
may reasonably identify to JBI from time to time, (ii) new extensions of credit
by the Jefferson Banks where the aggregate exposure exceeds $5,000,000, and
(iii) conforming, based upon such consultation, the composition of the
investment portfolio and overall asset/liability management position of JBI and
the Jefferson Banks to the extent appropriate; provided that any required change
in JBI's practices in connection with the matters described in clause (i) or
(iii) above need not be effected (A) more than five days prior to the Effective
Time and (B) unless and until all necessary regulatory, governmental and
shareholder approvals and consents have been received, all statutory waiting
periods in respect thereof have expired, HUB agrees in writing that all
conditions precedent to the Closing have occurred (other than the delivery of
certificates, opinions and other instruments and documents to be delivered at
the Closing), and HUB has provided the Closing Notice. No accrual or reserve
made by JBI or any JBI Subsidiary pursuant to this subsection, or any litigation
or regulatory proceeding arising out of any such accrual or reserve, shall
constitute or be deemed to be a breach or violation of any representation,
warranty, covenant, condition or other provision of this Agreement or to
constitute a termination event within the meaning of Section 7.1(d) or Section
7.1(g) hereof.
5.16 Pooling and Tax-Free Reorganization Treatment. Before the
Effective Time, neither HUB nor JBI 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, HUB 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.
5.17 Comfort Letters. HUB shall cause Arthur Andersen, its
independent public accountants, to deliver to JBI, and JBI shall cause Grant
Thornton, its independent public accountants, to deliver to HUB and to its
officers and directors who sign the Registration Statement for this transaction,
a "comfort letter" or "agreed upon procedures" letter, dated the date of the
mailing of the Joint Proxy Statement-Prospectus for the Shareholders Meeting of
JBI, in the form customarily issued by such accountants at such time in
transactions of this type, and in substance reasonably satisfactory to JBI.
5.18 Affiliates. Promptly, but in any event within two weeks,
after the execution and delivery of this Agreement, JBI shall deliver to HUB (a)
a letter identifying all persons who, to the knowledge of JBI, may be deemed to
be affiliates of JBI under Rule 145 of the 1933 Act and the pooling-of-interests
accounting rules, including, without limitation, all directors and executive
officers of JBI and (b) use its reasonable best efforts to cause each person who
may be deemed to be an affiliate of JBI to execute and deliver to HUB a letter
agreement, substantially in the form of Exhibit 5.19-1, agreeing to comply with
Rule 145 and to refrain from transferring shares as required by the
pooling-of-interests accounting rules. Within two weeks after the date hereof,
HUB shall use its reasonable best efforts to cause its directors and executive
officers (and other parties who may be deemed to be affiliates, if any) to enter
into letter agreements in the form of Exhibit 5.19-2 with HUB concerning the
pooling-of-interests accounting rules.
5.19 Operation of the JBI Division. For a period of no less
than three years following the Closing, HUB shall cause the Bank to operate a
separate division of the Bank to be known as the Jefferson Bank Division of
Hudson United Bank (the "Division"), which Division will be assigned
responsibility, within established policies and procedures of the Bank, for the
former business banking operations of the Jefferson Banks and of the Bank's
southern New Jersey branches, and for the residential mortgage lending and
consumer lending for the Bank as a whole.
5.20 Appointments. As of the Effective Time: (a) HUB and the
Bank shall cause Betsy Z. Cohen to be appointed as Chairperson and Chief
Executive Officer of the Division; (b) the Bank shall cause Robert B. Goldstein
to be appointed as President and Chief Operating Officer of the Division; (c)
the Bank shall invite the directors of JBI to serve on an advisory Board of
Directors for the Division; (d) HUB shall cause three persons designated by JBI
and reasonably acceptable to HUB to be appointed as directors of the Bank; and
(e) HUB shall cause Betsy Z. Cohen and William H. Lamb to be appointed as
directors of HUB. In connection with HUB's next annual shareholders meeting, HUB
shall cause Betsy Z. Cohen to be nominated for a three year term as director of
HUB.
ARTICLE VI - CLOSING CONDITIONS
6.1. Conditions to Each Party's Obligations Under this
Agreement. The respective obligations of each party under this Agreement to
consummate the Merger shall be subject to the satisfaction, or, where
permissible under applicable law, waiver at or prior to the Effective Time of
the following conditions:
(a) Approval of Shareholders; SEC Registration. This Agreement
and the transactions contemplated hereby shall have been approved by the
requisite vote of the shareholders of JBI and by the requisite vote of the
shareholders of HUB. The HUB Registration Statement shall have been declared
effective by the SEC and shall not be subject to a stop order or any threatened
stop order, and the issuance of the HUB Common Stock shall have been qualified
in every state where such qualification is required under the applicable state
securities laws. The HUB Common Stock to be issued in connection with the
Merger, including HUB Common Stock to be issued for the JBI Stock Options, shall
have been approved for listing on the NYSE.
(b) Regulatory Filings. All necessary regulatory or
governmental approvals and consents (including without limitation any required
approval of the FDIC, the New Jersey Department, the Pennsylvania Department,
the FRB, the SEC and (if necessary) the NJDEP and the PDEP) required to
consummate the transactions contemplated hereby shall have been obtained without
the imposition of any non-standard or non-customary term or condition which
would materially impair the value of JBI and the Jefferson Banks, taken as a
whole, to HUB. All conditions required to be satisfied prior to the Effective
Time by the terms of such approvals and consents shall have been satisfied; and
all statutory waiting periods in respect thereof (including the
Hart-Scott-Rodino waiting period if applicable) shall have expired.
(c) Suits and Proceedings. No order, judgment or decree shall
be outstanding against a party hereto or a third party that would have the
effect of preventing completion of the Merger; no suit, action or other
proceeding shall be pending or threatened by any Governmental Entity in which it
is sought to restrain or prohibit the Merger; and no suit, action or other
proceeding shall be pending before any court or Governmental Entity in which it
is sought to restrain or prohibit the Merger or obtain other substantial
monetary or other relief against one or more parties hereto in connection with
this Agreement and which HUB or JBI determines in good faith, based upon the
advice of their respective counsel, makes it inadvisable to proceed with the
Merger because any such suit, action or proceeding has a significant potential
to be resolved in such a way as to deprive the party electing not to proceed of
any of the material benefits to it of the Merger.
(d) Tax Opinion. HUB and JBI shall each have received an
opinion, dated as of the Effective Time, of Pitney, Hardin, Kipp & Szuch,
reasonably satisfactory in form and substance to JBI and its counsel and to HUB,
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 JBI; (iii) no gain or loss will be recognized by the JBI
shareholders upon the exchange of JBI Common Stock solely for HUB Common Stock;
(iv) the tax basis of any HUB Common Stock received in exchange for JBI Common
Stock shall equal the basis of the recipient's JBI Common Stock surrendered in
the exchange, reduced by the amount of cash received, if any, in the exchange,
and increased by the amount of the gain recognized, if any, in the exchange
(whether characterized as dividend or capital gain income); and (v) the holding
period for any HUB Common Stock received in exchange for JBI Common Stock will
include the period during which JBI Common Stock surrendered in the exchange was
held, provided such stock was held as a capital asset on the date of the
exchange.
(e) Pooling of Interests. HUB shall have received a letter,
dated the Closing Date, from its accountants, Arthur Andersen, reasonably
satisfactory to HUB and JBI, to the effect that, based on a review of this
Agreement and related agreements and the facts and circumstances known to it,
the Merger shall be qualified to be treated by HUB as a pooling-of-interests for
accounting purposes.
6.2. Conditions to the Obligations of HUB Under this
Agreement. The obligations of HUB 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 JBI and the Jefferson Banks. Except for those representations which are made
as of a particular date, the representations and warranties of JBI contained in
this Agreement shall be true and correct in all material respects on the Closing
Date as though made on and as of the Closing Date, except to the extent waived
pursuant to Section 5.12 hereof. JBI 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 JBI Disclosure
Schedule to render such representation or warranty true and correct in all
material respects as of the Closing Date, the representation and warranty shall
be deemed true and correct as of the Closing Date only if (i) the information
contained in the supplement or amendment to the Disclosure Schedule related to
events occurring following the execution of this Agreement and (ii) the facts
disclosed in such supplement or amendment would not either alone, or together
with any other supplements or amendments to the JBI Disclosure Schedule,
materially adversely affect the representation as to which the supplement or
amendment relates.
(b) Opinion of Counsel. HUB shall have received an opinion of
counsel to JBI, dated the Closing Date, in form and substance reasonably
satisfactory to HUB, substantially to the effect set forth in accordance with
Exhibit 6.2(b) hereto.
(c) Certificates. JBI shall have furnished HUB with such
certificates of its officers or other documents to evidence fulfillment of the
conditions set forth in this Section 6.2 as HUB may reasonably request.
(d) Legal Fees. JBI shall have furnished HUB with letters from
all attorneys representing JBI and the Jefferson Banks in any matters confirming
that all material legal fees have been paid in full for services rendered as of
the Effective Time.
(e) Merger Related Expense. JBI shall have provided HUB with
an accounting of all merger related expenses incurred by it through the Closing
Date, including a good faith estimate of such expenses incurred but as to which
invoices have not been submitted as of the Closing Date. The merger related
expenses of JBI, other than printing expenses (which are within the control of
HUB), shall be based upon normal and customary billing rates and fees.
6.3. Conditions to the Obligations of JBI Under this
Agreement. The obligations of JBI 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 HUB. Except for those representations which are made as of a particular date,
the representations and warranties of HUB contained in this Agreement shall be
true and correct in all material respects on the Closing Date as though made on
and as of the Closing Date, except to the extent waived pursuant to Section 5.12
hereof. HUB 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 HUB Disclosure Schedule to render such
representation or warranty true and correct in all material respects as of the
Closing Date, the representation and warranty shall be deemed true and correct
as of the Closing Date only if (i) the information contained in the supplement
or amendment to the Disclosure Schedule related to events occurring following
the execution of this Agreement and (ii) the facts disclosed in such supplement
or amendment would not either alone, or together with any other supplements or
amendments to the HUB Disclosure Schedule, materially adversely affect the
representation as to which the supplement or amendment relates.
(b) Opinion of Counsel to HUB. JBI shall have received an
opinion of counsel to HUB, dated the Closing Date, in form and substance
reasonably satisfactory to JBI, substantially to the effect set forth in
accordance with Exhibit 6.3(b) hereto.
(c) Certificates. HUB shall have furnished JBI with such
certificates of its officers and such other documents to evidence fulfillment of
the conditions set forth in this Section 6.3 as JBI may reasonably request.
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1. Termination. This Agreement may be terminated prior to
the Effective Time, whether before or after approval of this Agreement by the
shareholders of JBI:
(a) by mutual written consent of the parties hereto;
(b) by HUB or JBI (i) if the Effective Time shall not have
occurred on or prior to the Cutoff Date unless the failure of such occurrence
shall be due to the failure of the party seeking to terminate this Agreement to
perform or observe its agreements set forth herein to be performed or observed
by such party at or before the Effective Time, or (ii) if a vote of the
shareholders of JBI is taken and such shareholders fail to approve this
Agreement at the meeting (or any adjournment or postponement thereof) held for
such purpose (provided that the terminating party shall not be in material
breach of any of its obligations under Section 5.7 hereof), or (iii) if a vote
of the shareholders of HUB is taken and such shareholders fail to approve this
Agreement at the meeting (or any adjournment or postponement thereof) held for
such purpose (provided that the terminating party shall not be in material
breach of any of its obligations under Section 5.7 hereof);
(c) by HUB or JBI 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 HUB upon written notice to JBI if any such
application is approved with conditions (other than conditions which are
customary or standard in such regulatory approvals) which would materially
impair the value of JBI and the Jefferson Banks, taken as a whole, to HUB;
(d) by HUB if (i) there shall have occurred an JBI Material
Adverse Change from that disclosed by JBI in JBI's Annual Report on Form 10-K
for the year ended December 31, 1998 or (ii) there was a material breach in any
representation, warranty, covenant, agreement or obligation of JBI hereunder and
such breach shall not have been remedied within 30 days after receipt by JBI of
notice in writing from HUB to JBI specifying the nature of such breach and
requesting that it be remedied;
(e) by JBI, if (i) there shall have occurred a HUB Material
Adverse Change from that disclosed by HUB in HUB's Annual Report on Form 10-K
for the year ended December 31, 1998, which change shall have resulted in a
material adverse effect on HUB (it being understood that those matters disclosed
in the HUB Disclosure Schedule shall not be deemed to constitute such a material
adverse effect); or (ii) there was a material breach in any representation,
warranty, covenant, agreement or obligation of HUB hereunder and such breach
shall not have been remedied within 30 days after receipt by HUB of notice in
writing from JBI specifying the nature of such breach and requesting that it be
remedied;
(f) by JBI, if JBI'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 HUB if the conditions set forth in Sections 6.1 and 6.2
are not satisfied and are not capable of being satisfied by the Cutoff Date;
(h) by JBI if the conditions set forth in Sections 6.1 and 6.3
are not satisfied and are not capable of being satisfied by the Cutoff Date; or
(i) by JBI, if (either before or after the approval of this
Agreement by the stockholders of JBI) its Board of Directors so determines by a
vote of a majority of the members of its entire Board, at any time during the
three business day period commencing with (and including) the Determination
Date, if both of the following conditions are satisfied:
(x) the Median Pre-Closing Price of HUB Common Stock
on the Determination Date (the "Determination Price"), is less than the HUB
Floor Price. The "HUB Floor Price" is 70% of the HUB Average Starting Date
Price. The "HUB Average Starting Date Price" is the average of the high and low
sale prices of HUB Common Stock on the trading day immediately preceding the
date hereof (the "Starting Date"), as the same shall be adjusted to reflect any
Capital Change; and
(y) (A) the quotient obtained by dividing the
Determination Price by the HUB Average Starting Date Price (the "HUB Ratio") is
less than (B) the quotient obtained by dividing the number calculated using the
index of financial institutions set forth on Exhibit A hereto (the "Index
Price") as of the close of business on the Determination Date by the Index Price
as of the close of business on the Starting Date and subtracting 0.20 from the
quotient in this clause (y)(B) (such number being referred to herein as the
"Index Ratio").
Notwithstanding the foregoing, if JBI elects to exercise its
termination right pursuant to this subsection (i), it shall give prompt written
notice to HUB (provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned three business day period)).
During the two business day period commencing with its receipt of such notice,
HUB shall have the option of increasing the consideration to be received by the
holders of JBI Common Stock hereunder by increasing the Exchange Ratio to equal
the lesser of (i) a number (rounded to four decimals) equal to a quotient, the
numerator of which is the HUB Floor Price multiplied by the Exchange Ratio (as
then in effect) and the denominator of which is the Determination Price, and
(ii) a number (rounded to four decimals) equal to a quotient, the numerator of
which is the Index Ratio multiplied by the Exchange Ratio (as then in effect)
and the denominator of which is the HUB Ratio. If HUB makes an election
contemplated by the preceding sentence, within such two business day period, it
shall give prompt written notice to JBI of such election and the revised
Exchange Ratio, whereupon no termination shall have occurred pursuant to this
subsection (i) and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified), and any
references in this Agreement to "Exchange Ratio" shall thereafter be deemed to
refer to the Exchange Ratio as adjusted pursuant to this subsection (i).
7.2. Effect of Termination. In the event of the termination
and abandonment of this Agreement by either HUB or JBI pursuant to Section 7.1,
this Agreement (other than Section 5.5(b), the penultimate sentence of Section
5.6(h), this Section 7.2 and Section 8.1) shall forthwith become void and have
no effect, without any liability on the part of any party or its officers,
directors or shareholders. Nothing contained herein, however, shall relieve any
party from any liability for any breach of this Agreement.
7.3. Amendment. This Agreement may be amended by action taken
by the parties hereto at any time before or after adoption of this Agreement by
the shareholders of JBI but, after any such adoption, no amendment shall be made
which reduces the amount or changes the form of the consideration to be
delivered to the shareholders of JBI without the approval of such shareholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of all the parties hereto.
7.4. Extension; Waiver. The parties may, at any time prior to
the Effective Time of the Merger, (i) extend the time for the performance of any
of the obligations or other acts of the other parties hereto; (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto; or (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party against which the waiver is
sought to be enforced.
ARTICLE VIII - MISCELLANEOUS
8.1. Expenses.
(a) Except as otherwise expressly stated herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including legal, accounting and investment banking fees and
expenses) shall be borne by the party incurring such costs and expenses.
Notwithstanding the foregoing, JBI may bear the expenses of the Jefferson Banks.
(b) Notwithstanding any provision in this Agreement to the
contrary, in the event that either of the parties shall willfully default in its
obligations hereunder, the non-defaulting party may pursue any remedy available
at law or in equity to enforce its rights and shall be paid by the willfully
defaulting party for all damages, costs and expenses, including without
limitation legal, accounting, investment banking and printing expenses, incurred
or suffered by the non-defaulting party in connection herewith or in the
enforcement of its rights hereunder.
8.2. Survival. The respective representations, warranties,
covenants and agreements of the parties to this Agreement shall not survive the
Effective Time, but shall terminate as of the Effective Time, except for Article
II, this Section 8.2 and Sections 5.5(b), 5.8(a), 5.11 and 5.14.
8.3. Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or by reputable overnight courier or sent by registered or certified
mail, postage prepaid, as follows:
(a) If to HUB, to:
Hudson United Bancorp.
1000 MacArthur Boulevard
Mahwah, NJ 07430
Attn.: Kenneth T. Neilson, Chairman, President and
Chief Executive Officer
Copy to:
Hudson United Bancorp.
1000 MacArthur Boulevard
Mahwah, NJ 07430
Attn.: D. Lynn Van Borkulo-Nuzzo, Esq.
And copy to:
Pitney, Hardin, Kipp & Szuch
(mail to) P.O. Box 1945
Morristown, NJ 07962
(deliver to) 200 Campus Drive
Florham Park, NJ 07932
Attn.: Ronald H. Janis, Esq.
(b) If to JBI, to:
JeffBanks, Inc.
1845 Walnut Street
Philadelphia, PA 19109
Attn.: Betsy Z. Cohen, Chairman and Chief Executive Officer
Copy to:
Ledgewood Law Firm, P.C.
1521 Locust Street, Suite 800
Philadelphia, PA 19102
Attn.: J. Baur Whittlesey, Esq.
or such other addresses as shall be furnished in writing by any party, and any
such notice or communications shall be deemed to have been given as of the date
actually received.
8.4. Parties in Interest; Assignability. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Nothing in this Agreement is intended to
confer, expressly or by implication, upon any other person any rights or
remedies under or by reason of this Agreement except the Indemnitees described
in Section 5.14. This Agreement and the rights and obligations of the parties
hereunder may not be assigned.
8.5. Entire Agreement. This Agreement, which includes the
Disclosure Schedules hereto and the other documents, agreements and instruments
executed and delivered pursuant to or in connection with this Agreement,
contains the entire Agreement between the parties hereto with respect to the
transactions contemplated by this Agreement and supersedes all prior
negotiations, arrangements or understandings, written or oral, with respect
thereto, other than any confidentiality agreements entered into by the parties
hereto.
8.6. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
8.7. Governing Law. This Agreement shall be governed by the
laws of the State of New Jersey, without giving effect to the principles of
conflicts of laws thereof.
8.8. Descriptive Headings. The descriptive headings of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any provision of this Agreement.
IN WITNESS WHEREOF, HUB, the Bank, JBI and the Jefferson Banks
have caused this Agreement to be executed by their duly authorized officers as
of the day and year first above written.
ATTEST: HUDSON UNITED BANCORP
By: _____________________________ By: ___________________________
Virginia A. Lazala D. Lynn Van Borkulo-Nuzzo
Assistant Corporate Secretary Executive Vice-President
ATTEST: JEFFBANKS, INC.
By: ________________________ By: _________________________________
Robert B. Goldstein Betsy Z. Cohen, Chairman,
President and Chief Executive Officer
ATTEST: HUDSON UNITED BANK
By: _____________________________ By: _________________________________
Virginia A. Lazala D. Lynn Van Borkulo-Nuzzo
Assistant Corporate Secretary Executive Vice-President
ATTEST: JEFFERSON BANK
By: _____________________________ By: _________________________________
Robert B. Goldstein Betsy Z. Cohen, Chairman,
President and Chief Executive Officer
ATTEST: JEFFERSON BANK OF NEW JERSEY
By: ________________________ By: ________________________________
Robert Goldstein Betsy Z. Cohen, Chairman,
President and Chief Executive Officer
<PAGE>
Exhibit A to
Merger Agreement
Index
Company Name Ticker
- ------------ ------
Carolina First CAFC
Centura Banks CBC
Commerce Bancorp CBH
Commercial Federal CFB
Community First Bank CFBX
Cullen/Frost CFR
First Bancorp FBP
First Midwest FMBI
FirstMerit Corp. FMER
Premier Bancshs PMB
Provident Bancshs PBKS
Riggs National Corp RIGS
Silicon Val Bkshrs SIVB
Susquehan Bkshs SUSQ
Trust Co Bank NY TRST
United Bancshares UBSI
Whitney Hldg WTNY
The "Index Price" is determined by adding the price per common share of each of
the companies listed above on the appropriate date (i.e., the Starting Date or
the Determination Date, as the case nay be). If any company belonging to the
Index Group declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares, or similar
transaction between the Starting Date and the Determination Date, the price per
share of the common stock of such company on the Determination Date shall be
appropriately adjusted.
If, at any time after the Starting Date and before the Determination Date, the
common stock of any company on this Exhibit A ceases to be publicly traded or
any public announcement of a proposal for such company to be acquired or for
such company to acquire another company or companies in transactions with a
value exceeding 25% of the acquiror's market capitalization, such company shall
be removed from the Index Group effective as of the Starting Date (i.e., such
Company shall not be considered part of the Index Group for any purposes in
connection with this Merger Agreement).
<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated as of June 28,
1999, is by and between Hudson United Bancorp, a New Jersey corporation and
registered bank holding company ("HUB"), and JeffBanks, Inc., a Pennsylvania
corporation and registered bank holding company ("JBI").
BACKGROUND
WHEREAS, HUB and JBI, as of the date hereof, are prepared to
execute a definitive agreement and plan of merger (the "Merger Agreement")
pursuant to which JBI will be merged with and into HUB (the "Merger"); and
WHEREAS, HUB has advised JBI that it will not execute the
Merger Agreement unless JBI executes this Agreement; and
WHEREAS, the Board of Directors of JBI has determined that the
Merger Agreement provides substantial benefits to the shareholders of JBI; and
WHEREAS, as an inducement to HUB to enter into the Merger
Agreement and in consideration for such entry, JBI desires to grant to HUB an
option to purchase authorized but unissued shares of common stock of JBI 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, HUB and JBI, intending
to be legally bound hereby, agree:
1. Grant of Option. JBI hereby grants to HUB an option to
purchase 1,212,706 shares of common stock, $1.00 par value, of JBI (the "Common
Stock") at a price of $26.00 per share (the "Option Price"), on the terms and
conditions set forth herein (the "Option"); provided, however, that in no event
shall the number of shares for which this Option is exercisable exceed the
lesser of (i) 19.9% of the issued and outstanding shares of Common Stock, and
(ii) such number of shares of Common Stock that will trigger application of the
provisions of Subchapter E of Chapter 25 of the Pennsylvania Business
Corporation Law.
2. Exercise of Option. This Option shall not be exercisable
until the occurrence of a Triggering Event (as such term is hereinafter
defined). Upon or after the occurrence of a Triggering Event (as such term is
hereinafter defined), HUB 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 HUB or an affiliate of HUB:
a. acquires beneficial ownership (as such term is defined in
Rule 13d-3 as promulgated under the Exchange Act) of at least 10% of the then
outstanding shares of Common Stock; or
b. enters into a letter of intent or an agreement, whether
oral or written, with JBI pursuant to which such person or any affiliate of such
person would (i) merge or consolidate, or enter into any similar transaction,
with JBI, (ii) acquire all or a significant portion of the assets or liabilities
of JBI, or (iii) acquire beneficial ownership of securities representing, or the
right to acquire beneficial ownership or to vote securities representing, 10% or
more of the then outstanding shares of Common Stock; or
c. makes a filing with any bank or thrift regulatory
authorities with respect to or publicly announces a bona fide proposal (a
"Proposal") for (i) any merger with, consolidation with or acquisition of all or
a significant portion of all the assets or liabilities of, JBI or any other
business combination involving JBI, or (ii) a transaction involving the transfer
of beneficial ownership of securities representing, or the right to acquire
beneficial ownership or to vote securities representing, 10% or more of the
outstanding shares of Common Stock, and in either case thereafter, if such
Proposal has not been Publicly Withdrawn (as such term is hereinafter defined)
at least 15 days prior to the meeting of stockholders of JBI called to vote on
the Merger and JBI'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, JBI 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 HUB.
The term "Triggering Event" also means the taking of any
material direct or indirect action by JBI or any of its directors, senior
executive officers, investment bankers or other person with actual or apparent
authority to speak for the Board of Directors, inviting, encouraging or
soliciting any proposal (other than from HUB or an affiliate of HUB) 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 JBI,
or a sale of a significant number of shares of Common Stock or any significant
portion of its assets or liabilities.
The term "significant portion" means 10% of the assets or
liabilities of JBI. The term "significant number" means 10% of the outstanding
shares of Common Stock.
"Publicly Withdrawn", for purposes of clauses (c) and (d)
above, shall mean an unconditional bona fide withdrawal of the Proposal coupled
with a public announcement of no further interest in pursuing such Proposal or
in acquiring any controlling influence over JBI or in soliciting or inducing any
other person (other than HUB or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised
at any time (i) in the absence of any required governmental or regulatory
approval or consent (including any filing, approval or consent required under
the rules and regulations of the National Association of Securities Dealers,
Inc.) necessary for JBI to issue the shares of Common Stock covered by the
Option (the "Option Shares") or HUB 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.
JBI shall notify HUB promptly in writing of the occurrence of
any Triggering Event known to it, it being understood that the giving of such
notice by JBI shall not be a condition to the right of HUB to exercise the
Option. JBI will not take any action which would have the effect of preventing
or disabling JBI from delivering the Option Shares to HUB 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 HUB wishes to exercise the Option, HUB shall send
a written notice to JBI (the date of which is hereinafter referred to as the
"Notice Date") specifying the total number of Option Shares it wishes to
purchase and a place and date between two and ten business days inclusive from
the Notice Date for the closing of such a purchase (a "Closing"); provided,
however, that a Closing shall not occur prior to two days after the later of
receipt of any necessary regulatory approvals and the expiration of any legally
required notice or waiting period, if any.
3. Payment and Delivery of Certificates. At any Closing
hereunder (a) HUB will make payment to JBI of the aggregate price for the Option
Shares so purchased by wire transfer of immediately available funds to an
account designated by JBI; (b) JBI will deliver to HUB 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 JBI, registered in the name of HUB or its
designee, in such denominations as were specified by HUB in its notice of
exercise and, if necessary, bearing a legend as set forth below; and (c) HUB
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 JeffBanks, 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.
4. Registration Rights. Upon or after the occurrence of a
Triggering Event and upon receipt of a written request from HUB, JBI shall, if
necessary for the resale of the Option or the Option Shares by HUB, prepare and
file a registration statement with the Securities and Exchange Commission and
any state securities bureau covering the Option and such number of Option Shares
as HUB shall specify in its request, and JBI shall use its best efforts to cause
such registration statement to be declared effective in order to permit the sale
or other disposition of the Option and the Option Shares, provided that HUB
shall in no event have the right to have more than one such registration
statement become effective, and provided further that JBI shall not be required
to prepare and file any such registration statement in connection with any
proposed sale with respect to which counsel to JBI delivers to JBI and to HUB
(which is reasonably acceptable to HUB) its opinion to the effect that no such
filing is required under applicable laws and regulations with respect to such
sale or disposition; provided further, however, that JBI may delay any
registration of Option Shares above for a period not exceeding 90 days in the
event that JBI shall in good faith determine that any such registration would
adversely effect an offering of securities by JBI for cash. HUB shall provide
all information reasonable requested by JBI for inclusion in any registration
statement to be filed hereunder.
In connection with such filing, JBI shall use its best efforts
to cause to be delivered to HUB such certificates, opinions, accountant's
letters and other documents as HUB 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 JBI 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 JBI and blue sky fees and expenses shall be paid by JBI.
Underwriting discounts and commissions to brokers and dealers relating to the
Option Shares, fees and disbursements of counsel to HUB and any other expenses
incurred by HUB in connection with such registration shall be borne by HUB. In
connection with such filing, JBI shall indemnify and hold harmless HUB against
any losses, claims, damages or liabilities, joint or several, to which HUB 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 JBI will reimburse HUB for any legal or
other expense reasonably incurred by HUB in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that JBI 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 HUB specifically for use in the preparation thereof. HUB will
indemnify and hold harmless JBI 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 HUB for use in the preparation of such
preliminary or final registration statement or such amendment or supplement
thereto; and HUB will reimburse JBI for any legal or other expense reasonably
incurred by JBI in connection with investigating or defending any such loss,
claim, damage, liability or action. Notwithstanding anything to the contrary
herein, no indemnifying party shall be liable for any settlement effected
without its prior written consent.
5. Adjustment Upon Changes in Capitalization. In the event of
any change in the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the like,
then the number and kind of Option Shares and the Option Price shall be
appropriately adjusted.
In the event any capital reorganization or reclassification of
the Common Stock, or any consolidation, merger or similar transaction of JBI
with another entity, or any sale of all or substantially all of the assets of
JBI, shall be effected in such a way that the holders of Common Stock shall be
entitled to receive stock, securities or assets with respect to or in exchange
for Common Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions (in form
reasonably satisfactory to the holder hereof) shall be made whereby the holder
hereof shall thereafter have the right to purchase and receive upon the basis
and upon the terms and conditions specified herein and in lieu of the Common
Stock immediately theretofore purchasable and receivable upon exercise of the
rights represented by this Option, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for the number of shares
of Common Stock immediately theretofore purchasable and receivable upon exercise
of the rights represented by this Option had such reorganization,
reclassification, consolidation, merger or sale not taken place; provided,
however, that if such transaction results in the holders of Common Stock
receiving only cash, the holder hereof shall be paid the difference between the
Option Price and such cash consideration without the need to exercise the
Option.
6. Filings and Consents. Each of HUB and JBI will use its
reasonable efforts to make all filings with, and to obtain consents of, all
third parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement.
Exercise of the Option herein provided shall be subject to
compliance with all applicable laws including, in the event HUB is the holder
hereof, approval of the Securities and Exchange Commission, the Board of
Governors of the Federal Reserve System, the Office of Thrift Supervision, the
Federal Deposit Insurance Corporation or the New Jersey Department of Banking,
and JBI agrees to cooperate with and furnish to the holder hereof such
information and documents as may be reasonably required to secure such
approvals.
7. Repurchase of Option.
a. At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the Holder, delivered prior to the
termination of this Agreement, JBI (or any successor thereto) shall repurchase
the Option from the holder of this Option (the "Holder") at a price (the "Option
Repurchase Price") equal to the amount by which (A) the market/offer price (as
defined below) exceeds (B) the Option Price, multiplied by the number of shares
for which this Option may then be exercised and (ii) at the request of the owner
of Option Shares from time to time (the "Owner"),delivered prior to the
termination of this Agreement, JBI (or any successor thereto) shall repurchase
such number of the Option Shares from the Owner as the Owner shall designate at
a price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the highest price per share of Common Stock
paid by any person that acquires beneficial ownership of 50% or more of the then
outstanding Common Stock, (ii) the price per share of Common Stock to be paid by
any third party pursuant to an agreement with JBI entered into after the date
hereof and prior to the date the Holder gives notice of the required repurchase
of this Option or the Owner gives notice of the required repurchase of Option
Shares, as the case may be, (iii) the highest closing price for shares of Common
Stock within the six-month period immediately preceding the date the Holder
gives notice of the required repurchase of this Option or the Owner gives notice
of the required repurchase of Option Shares, as the case may be, or (iv) in the
event of a sale of all or any substantial part of the assets or deposits of JBI
or any bank subsidiary of JBI (a "JBI Subsidiary"), the sum of the net price
paid in such sale for such assets or deposits and the current market value of
the remaining net assets of JBI and its Subsidiaries as determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to JBI, divided by the
number of shares of Common Stock of JBI outstanding at the time of such sale on
a fully-diluted basis. In determining the market/offer price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to JBI.
b. The Holder and the Owner, as the case may be, may exercise
its right to require JBI to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to JBI, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require JBI to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five (5) business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, JBI shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that JBI is not then prohibited under applicable law, regulation and
administrative policy from so delivering.
c. To the extent that JBI is prohibited under applicable law
or regulation, or as a consequence of governmental administrative policy, from
repurchasing the Option and/or the Option Shares in full, JBI shall immediately
so notify the Holder and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to the Holder and/or the Owner, as appropriate,
the portion of the Option Repurchase Price and the Option Share Repurchase
Price, respectively, that it is no longer prohibited from delivering, within
five (5) business days after the date on which JBI is no longer so prohibited;
provided, however, that if JBI at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation, or as a consequence of governmental administrative
policy, from delivering to the Holder and/or the Owner, as appropriate, the
Option Repurchase Price and the Option Share Repurchase Price, respectively, in
full (and JBI hereby undertakes to use its reasonable best efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase), the Holder or
Owner may revoke its notice of repurchase of the Option and/or the Option Shares
whether in whole or to the extent of the prohibition, whereupon, in the latter
case, JBI shall promptly (i) deliver to the Holder and/or the Owner, as
appropriate, that portion of the Option Repurchase Price and/or the Option Share
Repurchase Price that JBI is not prohibited from delivering; and (ii) deliver,
as appropriate, either (A) to the Holder, a new Agreement evidencing the right
of the Holder to purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the surrendered
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Priceless the
portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, and/or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by JBI
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth
(30th) day after such date, the Holder shall nonetheless have the right to
exercise the Option until the expiration of such 30-day period.
d. For purposes of this Section 7, a "Repurchase Event" shall
be deemed to have occurred upon the occurrence of any of the following events or
transactions after the date hereof: (i) any person other than HUB or any HUB
Subsidiary (a "Third Party") acquires beneficial ownership of fifteen percent
(15%) or more of the then outstanding Common Stock; or (ii) JBI enters into a
written definitive agreement with any Third Party providing for (i) the
acquisition by a Third Party of fifteen percent (15%) or more of the assets of
JBI and its Subsidiaries taken as a whole; or (ii) the acquisition by a Third
Party of fifteen percent (15%) or more of the outstanding Common Stock or any
securities convertible into or exchangeable or exercisable for shares of Common
Stock that would constitute fifteen percent (15%) or more of the outstanding
Common Stock upon such conversion, exchange or exercise; or (iii) the
acquisition by JBI of the assets or stock of a Third Party if, as a result, the
outstanding shares of Common Stock immediately prior thereto are increased by
fifteen percent (15%); or (iv) the merger, consolidation or business combination
of JBI with or into a Third Party where, following such merger, consolidation or
business combination, the shareholders of JBI (other than the Third Party or its
affiliates) prior to such transaction do not hold, immediately after such
transaction, securities of the surviving entity constituting more than fifty
percent (50%) of the total voting power of the surviving entity.
8. Representations and Warranties of JBI. JBI hereby
represents and warrants to HUB as follows:
a. Due Authorization. JBI has full corporate power and
authority to execute, deliver and perform this Agreement and all corporate
action necessary for execution, delivery and performance of this Agreement has
been duly taken by JBI.
b. Authorized Shares. JBI has taken and, as long as the Option
is outstanding, will take all necessary corporate action to authorize and
reserve for issuance all shares of Common Stock that may be issued pursuant to
any exercise of the Option.
c. No Conflicts. Neither the execution and delivery of this
Agreement nor consummation of the transactions contemplated hereby (assuming all
appropriate regulatory approvals) will violate or result in any violation or
default of or be in conflict with or constitute a default under any term of the
Certificate of Incorporation or Bylaws of JBI or any agreement, instrument,
judgment, decree or order applicable to JBI.
9. Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
Notwithstanding the foregoing, HUB shall have the right to seek money damages
against JBI for a breach of this Agreement.
10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof.
11. Assignment or Transfer. HUB may not sell, assign or
otherwise transfer its rights and obligations hereunder, in whole or in part, to
any person or group of persons other than to an affiliate of HUB. HUB represents
that it is acquiring the Option for HUB's own account and not with a view to or
for sale in connection with any distribution of the Option or the Option Shares.
HUB is aware that neither the Option nor the Option Shares is the subject of a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission pursuant to Section 5 of the Securities Act, but instead
each is being offered in reliance upon the exemption from the registration
requirement provided by Section 4(2) thereof and the representations and
warranties made by HUB in connection therewith.
12. Amendment of Agreement. Upon mutual consent of the parties
hereto, this Agreement may be amended in writing at any time, for the purpose of
facilitating performance hereunder or to comply with any applicable regulation
of any governmental authority or any applicable order of any court or for any
other purpose.
13. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
14. Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered personally, by express service,
cable, telegram or telex, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
(a) If to HUB, to:
Hudson United Bancorp.
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Attn.: Kenneth T. Neilson, Chairman, President and
Chief Executive Officer
Copy to:
Hudson United Bancorp.
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Attn.: D. Lynn Van Borkulo-Nuzzo, Esq.
And copy to:
Pitney, Hardin, Kipp & Szuch
(mail to) P.O. Box 1945
Morristown, New Jersey 07962
(deliver to) 200 Campus Drive
Florham Park, New Jersey 07932
Attn.: Ronald H. Janis, Esq.
(b) If to JBI, to:
JeffBanks, Inc.
1845 Walnut Street
Philadelphia, PA 19109
Attn.: Betsy Z. Cohen, Chairman and Chief Executive Officer
Copy to:
Ledgewood Law Firm, P.C.
1521 Locust Street, Suite 800
Philadelphia, PA 19102
Attn.: J. Bauer Whittlesey, 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).
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
16. 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.
17. 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.
18. 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.
19. Counterparts. This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
20. 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 twenty-four (24) months following the date of the
termination of the Merger Agreement or the consummation of any proposed
transactions which constitute the Triggering Event.
21. Severability. If for any reason a court or a federal or
state regulatory agency of competent jurisdiction determines that the Holder is
not permitted to acquire, or JBI is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided herein, it is the
express intention of JBI to allow the Holder to acquire or to require JBI to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
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.
ATTEST: JEFFBANKS, INC.
By: ____________________________ By: _________________________________
Robert Goldstein Betsy Z. Cohen, Chairman,
President and Chief Executive Officer
ATTEST: HUDSON UNITED BANCORP
By: _____________________________ By: ______________________________________
Virginia A. Lazala D. Lynn Van Borkulo-Nuzzo
Assistant Corporate Secretary Executive Vice-President
<PAGE>
APPENDIX C
GOLDMAN SACHS & CO FAIRNESS OPINION
PERSONAL AND CONFIDENTIAL
June 28, 1999
Board of Directors
Hudson United Bancorp
1000 MacArthur Boulevard
Mahwah, NJ 07430
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to Hudson United Bancorp ("Hudson United") of the exchange ratio of 0.95 shares
of Common Stock, no par value (the "Hudson United Shares"), of Hudson United to
be exchanged (the "Exchange Ratio") for each share of Common Stock, par value
$1.00 per share (the "JeffBanks Shares"), of JeffBanks, Inc. ("JeffBanks")
pursuant to the Agreement and Plan of Merger, dated as of June 28, 1999, among
Hudson United, Hudson United Bank, a New Jersey state-chartered commercial
banking corporation and wholly-owned subsidiary of Hudson United, JeffBanks,
Jefferson Bank, a Pennsylvania bank and wholly-owned subsidiary of JeffBanks,
and Jefferson Bank of New Jersey, a New Jersey bank and wholly-owned subsidiary
of JeffBanks (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of 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. We are familiar with
Hudson United having provided certain financial advice from time to time,
including having provided Hudson United a fairness opinion in connection with
the acquisition of Lafayette American Bank and Trust Company in July 1996. We
did not act as financial advisor to Hudson United in connection with the
transaction contemplated by the Agreement. Goldman, Sachs & Co. provides a full
range of financial advisory and securities services and, in the course of its
normal trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of Hudson United or JeffBanks for
its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
Hudson United and JeffBanks for the five years ended December 31, 1998; certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of Hudson
United and JeffBanks; certain other communications from Hudson United and
JeffBanks to their respective stockholders; certain internal financial analyses
and forecasts for Hudson United and JeffBanks prepared by their respective
managements; and certain pro forma combined financial analyses and forecasts
prepared by the management of Hudson United (the "Pro Forma Combined
Forecasts"), including certain cost savings and operating synergies projected by
the management of Hudson United to result from the transaction contemplated by
the Agreement. We also have held discussions with members of the senior
management of Hudson United and JeffBanks regarding the strategic rationale for,
and the potential benefits of, the transaction contemplated by the Agreement and
the past and current business operations, financial condition and future
prospects of their respective companies. In addition, we have reviewed the
reported price and trading activity for the Hudson United Shares and the
JeffBanks Shares, compared certain financial and stock market information for
Hudson United and JeffBanks with similar information for certain other companies
the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the commercial banking industry and
performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. In that regard, we have assumed with
your consent that the Pro Forma Combined Forecasts prepared by the management of
Hudson United have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of Hudson United and that such
forecasts will be realized in the amounts and time periods contemplated thereby.
We are not experts in the evaluation of loan and lease portfolios for purposes
of assessing the adequacy of the allowances for losses with respect thereto and
have assumed, with your consent, that such allowances for each of Hudson United
and Jeff Banks are in the aggregate adequate to cover all such losses. In
addition, we have not reviewed individual credit files nor have we made an
independent evaluation or appraisal of the assets and liabilities (including any
hedge or derivative positions) of Hudson United or JeffBanks or any of their
subsidiaries and we have not been furnished with any such evaluation or
appraisal. We have also assumed with your consent that the transaction
contemplated by the Agreement will be accounted for as a pooling-of-interests
under generally accepted accounting principles. We also have assumed that all
material governmental, regulatory or other consents and approvals necessary for
the consummation of the transaction contemplated by the Agreement will be
obtained without any adverse effect on Hudson United or JeffBanks or on the
contemplated benefits of the transaction contemplated by the Agreement. Our
advisory services and the opinion expressed herein are provided to the Board of
Directors of Hudson United in connection with the execution by Hudson United of
the Agreement and such opinion does not constitute a recommendation as to how
any holder of Hudson United Shares should vote with respect to the transaction
contemplated by the Agreement.
You have informed us that the Company on the date hereof may execute an
agreement providing for the merger of Hudson United and Southern Jersey Bancorp
of Delaware, Inc. (the "Southern Jersey Merger"), and you have instructed us for
purposes of this opinion to assume that the Southern Jersey Merger will be
consummated on the basis and with the financial consequences indicated in the
Pro Forma Combined Forecasts. We have not acted as your financial advisor in
connection with, and in particular have not been asked to opine, and have not
opined, on the fairness of the Southern Jersey Merger.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair from a financial point of view to Hudson
United.
Very truly yours,
GOLDMAN, SACHS & CO.
<PAGE>
APPENDIX D
KEEFE, BRUYETTE & WOODS, INC. FAIRNESS OPINION
June 28, 1999
The Board of Directors
JeffBanks, Inc.
1845 Walnut Street
Philadelphia, PA 19103
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, to the shareholders of JeffBanks, Inc. ("JeffBanks") of the
exchange ratio in the proposed merger (the "Merger") of JeffBanks with and into
Hudson United Bancorp ("Hudson United") pursuant to the Agreement dated as of
June 28, 1999 between JeffBanks and Hudson United. It is our understanding that
the Merger will be structured as a pooling-of-interests transaction under
generally accepted accounting principles.
As is more specifically set forth in the Agreement, upon consummation
of the Merger, each outstanding share of the common stock of JeffBanks
("JeffBanks Common Stock"), except for any dissenting shares and certain other
shares held by JeffBanks and Hudson United, will be exchanged for .95 (the
"Exchange Ratio") of a share of Hudson United ("Hudson United Common Stock").
KBW, as part of its investment banking business, is
continually engaged in the valuation of bank holding companies and banks, thrift
holding companies and thrifts and their securities in connection with mergers
and acquisitions, underwriting, private placements, competitive bidding
processes, market making as a NASD market maker, and valuations for various
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,
trade the securities of JeffBanks or Hudson United, for our own account, and for
the accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities. To the extent we have any such positions as
of the date of this opinion it has been disclosed to JeffBanks. KBW has served
as financial advisor to JeffBanks in the negotiation of the Agreement and in
rendering this fairness opinion and will receive a fee from JeffBanks for those
services.
In arriving at our opinion, we have reviewed, analyzed and relied upon
material bearing upon the financial and operating condition of JeffBanks and
Hudson United and the merger, including among other things, the following:
i. Reviewed the Agreement;
ii. Reviewed certain historical financial and other information concerning
JeffBanks for the three months ended March 31, 1999 and the three years
ended December 31, 1998, including JeffBanks's Annual Report to
Stockholders and Annual Reports on Forms 10-K, and interim quarterly
reports on Form 10-Q;
iii. Reviewed certain historical financial and other information concerning
Hudson United for the three months ended March 31, 1999 and the three
years ended December 31, 1998, including Hudson United' Annual Report
to Stockholders and Annual Reports on Forms 10-K, and interim quarterly
reports on Form 10-Q;
iv. Reviewed and studied the historical stock prices and trading volumes of
the common stock of both JeffBanks and Hudson United;
v. Held discussions with senior management of JeffBanks and Hudson United
with respect to their past and current financial performance, financial
condition and future prospects;
vi. Reviewed certain internal financial data, projections and other
information of JeffBanks and Hudson United, including financial
projections prepared by management;
vii. Analyzed certain publicly available information of other financial
institutions that we deemed comparable or otherwise relevant to our
inquiry, and compared JeffBanks and Hudson United from a financial
point of view with certain of these institutions;
viii. Reviewed the financial terms of certain recent business combinations in
the banking industry that we deemed comparable or otherwise relevant to
our inquiry; and
ix. Conducted such other financial studies, analyses and investigations and
reviewed such other information as we deemed appropriate to enable us
to render our opinion.
<PAGE>
In conducting our review and arriving at our opinion, we have relied
upon 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 the accuracy or completeness of any such
information. We have relied upon the management of JeffBanks and Hudson United
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 such managements and that such
forecasts and projections will be realized in the amounts and in the time
periods currently estimated by such managements. We are not experts in the
independent verification of the adequacy of allowances for loan and lease losses
and we have assumed that the current and projected aggregate reserves for loan
and lease losses for JeffBanks and Hudson United are adequate to cover such
losses. We did not make or obtain any independent evaluations or appraisals of
any assets or liabilities of JeffBanks, Hudson United, or any of their
respective subsidiaries nor did we verify any of JeffBanks's or Hudson United'
books or records or review any individual loan or 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 financial position and results of operations of JeffBanks and
Hudson United; (ii) the assets and liabilities of JeffBanks and Hudson United;
and (iii) the nature and terms of certain other merger transactions involving
banks and bank holding companies. We also have 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 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 Exchange Ratio pursuant to the Agreement is fair, from a
financial point of view, to the holders of the JeffBanks Common Stock.
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. Hudson United'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, Hudson United 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. Hudson United'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 June 28, 1999, by and among
Hudson United Bancorp ("HUB"), Hudson United Bank (the "Bank"),
Jeffbanks, Inc. ("Jeffbanks") Jefferson Bank ("Jefferson") and
Jefferson Bank of New Jersey ("Jefferson-NJ") (included as Appendix A
to the Proxy Statement). *
2(b) Stock Option Agreement, dated as of June 28, 1999, by and between HUB
and Jeffbanks (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.
23(a) Consent of Grant Thornton LLP.
23(b) Consent of Arthur Andersen LLP.
23(c) Consent of Keefe, Bruyette & Woods, Inc.
23(d) Consent of Goldman, Sachs & Co.
23(e) Consent of Pitney, Hardin, Kipp & Szuch (included in Exhibits 5 and 8
hereto).
99(a) Form of HUB Proxy Card
99(b) Form of Jeffbanks Proxy Card
- -------------------------
* Included elsewhere in this registration statement.
** Incorporated by reference.
B. Report, Opinion or Appraisals
Form of Fairness Opinion of Goldman, Sachs & Co. is included as
Appendix C to the Proxy Statement-Prospectus.
Form of Fairness Opinion of Keefe, Bruyette & Woods, Inc. is included
as Appendix D to the Proxy Statement-Prospectus.
Item 22. Undertakings
- -------- ------------
1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
2. The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
3. The registrant undertakes that every prospectus (i) that is filed pursuant to
paragraph 2 immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a) (3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
4. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
5. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
6. Subject to appropriate interpretation, the undersigned registrant hereby
undertakes to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
7. The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 and Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
8. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
9. That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
10. To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Town of Mahwah,
State of New Jersey, on the 9th day of August, 1999.
HUDSON UNITED BANCORP
KENNETH T. NEILSON
By: _________________________
Kenneth T. Neilson,
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Chairman, President, Chief
KENNETH T. NEILSON Executive Officer and Director
- -------------------------------------------- (Principal Executive Officer) August 9, 1999
(Kenneth T. Neilson)
ROBERT J. BURKE
- -------------------------------------------- Director August 9, 1999
(Robert J. Burke)
DONALD P. CALCAGNINI
- -------------------------------------------- Director August 9, 1999
(Donald P. Calcagnini)
- -------------------------------------------- Director August __, 1999
(Joan David)
NOEL DeCORDOVA, JR.
- -------------------------------------------- Director August 9, 1999
(Noel deCordova, Jr.)
- -------------------------------------------- Director August __, 1999
(Thomas R. Farley)
- -------------------------------------------- Director August __, 1999
(Bryant D. Malcolm)
W. PETER McBRIDE
- -------------------------------------------- Director August 2, 1999
(W. Peter McBride)
CHARLES F.X. POGGI
- -------------------------------------------- Director August 9, 1999
(Charles F.X. Poggi)
- ------------------------------------------- Director August __, 1999
(David A. Rosow)
JAMES E. SCHIERLOH
- -------------------------------------------- Director August 9, 1999
(James E. Schierloh)
- -------------------------------------------- Director August __, 1999
(Sister Grace Frances Strauber)
JOHN H. TATIGIAN, JR.
- -------------------------------------------- Director August 9, 1999
(John H. Tatigian, Jr.)
JOSEPH F. HURLEY Executive Vice President and
- -------------------------------------------- Chief Financial Offer August 9, 1999
(Joseph F. Hurley)
RICHARD ALBAN
- -------------------------------------------- Controller August 9, 1999
(Richard Alban)
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
2(a) Agreement and Plan of Merger, dated as of June 28, 1999, by and among
Hudson United Bancorp ("HUB"), Hudson United Bank (the "Bank"),
Jeffbanks, Inc. ("Jeffbanks"), Jefferson Bank (the "Jefferson") and
Jefferson Bank of New Jersey ("Jefferson-NJ") (included as Appendix A
to the Proxy Statement). *
2(b) Stock Option Agreement, dated as of June 28, 1999, by and between HUB
and Jeffbanks (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.
23(a) Consent of Grant Thornton LLP.
23(b) Consent of Arthur Andersen LLP.
23(c) Consent of Keefe, Bruyette & Woods, Inc.
23(d) Consent of Goldman, Sachs & Co.
23(e) Consent of Pitney, Hardin, Kipp & Szuch (included in Exhibits 5 and 8
hereto).
99(a) Form of HUB Proxy Card
99(b) Form of Jeffbanks Proxy Card
- -------------------------
* Included elsewhere in this registration statement.
** Incorporated by reference.
PITNEY, HARDIN, KIPP & SZUCH
200 Campus Drive
Florham Park, New Jersey 07932
Mailing Address
P.O. Box 1945
Morrisown, New Jersey 07962-1945
August 9, 1999
Hudson United Bancorp
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Re: Merger of Hudson United Bancorp. and Jeffbanks, Inc.
We have acted as counsel to Hudson United Bancorp ("HUB") in connection
with its proposed issuance of its no par value common stock (the "Common
Stock"), pursuant to the Agreement and Plan of Merger among HUB, Hudson United
Bank, Jeffbanks, Inc., Jefferson Bank and Jefferson Bank of New Jersey dated as
of June 28, 1999. 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 HUB
currently in effect, relevant resolutions of the Board of Directors of HUB, and
such other documents as we deemed necessary in order to express the opinion
hereinafter set forth.
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 consent to use of this opinion as an Exhibit to the Registration
Statement and to the reference to this firm under the heading "Legal Opinion" in
the Prospectus. In giving such consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 or the rules of the SEC thereunder.
Very truly yours,
PITNEY, HARDIN, KIPP & SZUCH
PITNEY, HARDIN, KIPP & SZUCH
200 Campus Drive
Florham Park, New Jersey 07932
Mailing Address
P.O. Box 1945
Morrisown, New Jersey 07962-1945
August 9, 1999
Hudson United Bancorp.
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Attn: Kenneth T. Neilson, Chairman, President and
Chief Executive Officer
JeffBanks, Inc.
1845 Walnut Street
Philadelphia, Pennsylvania 19109
Attn: Betsy Z. Cohen, Chairman
and Chief Executive Officer
Re: Merger of Hudson United Bancorp. and JeffBanks, Inc.
Gentlemen:
We have represented Hudson United Bancorp. ("HUB"), a New
Jersey corporation which is a registered bank holding company, and Hudson United
Bank (the "Bank"), a New Jersey chartered commercial bank which is a wholly
owned subsidiary of HUB in connection with the proposed merger of JeffBanks,
Inc. ("JBI"), a Pennsylvania corporation which is a registered bank holding
company, into HUB (the "Merger"). The Merger shall be effected pursuant to the
provisions of an Agreement and Plan of Merger dated as of June 28, 1999 (the
"Merger Agreement") by and among HUB, the Bank, JBI, Jefferson Bank, a
Pennsylvania bank and wholly-owned subsidiary of JBI ("JBPA") and Jefferson Bank
of New Jersey, a New Jersey bank and wholly-owned subsidiary of JBI ("JBNJ")
(JBPA and JBNJ collectively the "Jefferson Banks.")
Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Proxy Statement-Prospectus pertaining to
the Merger.
We have assumed, with your consent, that:
(a) the Merger will be effected in accordance with the Merger
Agreement, and
(b) the representations contained in the letters of
representation from HUB and JBI dated August 6, 1999 will be true at the
Effective Time.
On the basis of the foregoing, and our consideration of such
other matters of fact and law as we have deemed necessary or appropriate, it is
our opinion, under presently applicable federal income tax law that:
1. The Merger will be treated for federal income tax purposes
as a "reorganization" qualifying under Section 368. (All "Section" references
are to the Internal Revenue Code of 1986, as amended unless otherwise noted.)
2. No gain or loss will be recognized by HUB or JBI in
connection with the Merger. Sections 361(a) and 1032.
3. JBI shareholders will not recognize any gain or loss for
federal income tax purposes upon the exchange in the Merger of shares of JBI
Common Stock solely for HUB Common Stock. Section 354(a).
4. JBI shareholders receiving cash in lieu of fractional
shares of HUB Common Stock will be treated as if such fractional shares had been
received from HUB and then subsequently redeemed by HUB. The cash received by
the JBI shareholders in lieu of fractional shares will be treated as having been
received as full payment in exchange for the fractional shares deemed to have
been redeemed. Section 302(a). Accordingly, such shareholders should, in
general, recognize capital gain or loss in an amount equal to the difference
between the amount of such cash received and the portion of the adjusted tax
basis in the HUB Common Stock allocable to the fractional share interest.
5. The basis of any HUB Common Stock received by a shareholder
of JBI in connection with the Merger (including the basis of any fractional
share interest in HUB Common Stock) will be the same as the basis of the shares
of JBI common stock surrendered in the exchange, reduced by the amount of any
cash received, if any, in the exchange, in lieu of fractional shares, and
increased by the amount of gain recognized, if any, in the exchange (whether
characterized as dividend or capital gain income). Section 358(a).
6. The holding period of the HUB Common Stock received by the
shareholders of JBI in connection with the Merger will include the period during
which their JBI Common Stock converted in the Merger was held, provided such
stock was held as a capital asset on the date of the Merger. Section 1223(l).
The opinions expressed herein are delivered to you solely in
connection with and for the purposes of the transactions contemplated by the
Merger Agreement, and are not to be relied upon by any other person, quoted in
whole or in part, or otherwise referred to (except in a list of closing
documents), nor are they to be provided to any other person without our prior
written consent. Notwithstanding the foregoing sentence, we consent to the
filing with the SEC of this letter as an exhibit to the Registration Statement
on Form S-4 of which the Proxy Statement is a part, and to the reference to our
firm under the heading "Federal Income Tax Consequences" contained therein. In
giving such consent, we do not admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933 or the
rules of the SEC thereunder.
Very truly yours,
PITNEY, HARDIN, KIPP & SZUCH
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We have issued our report dated January 19, 1999 accompanying the
consolidated financial statements of JeffBanks, Inc. and Subsidiaries appearing
in the 1998 Annual Report of the Company to its shareholders included in the
Annual Repport on Form 10-K for the year ended December 31, 1998 which is
incorporated by reference in this Joint Proxy Statement-Prospectus. We consent
to the incorporation by reference in the Joint Proxy Stateent-Prospectus of the
aforementioned report and to the use of our name, as it appears under the
caption "Experts."
GRANT THORNTON LLP
Philadelphia, Pennsylvania
August 9, 1999
INDEPENDENT ACCOUNTANTS' CONSENT
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement on Form S-4 of our
report dated January 12, 1999 included in Hudson United Bancorp'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
August 9, 1999
CONSENT OF KEEFE, BRUYETTE & WOODS, INC.
We hereby consent to the inclusion of our opinion letter dated August
9, 1999 to the Board of Directors of JeffBanks, Inc. ("JeffBanks") as part of
Annex A to the Registration Statement on Form S-4 ("Registration Statement") of
Hudson United Bancorp ("Hudson") and to all references to our firm and such
opinion in the Prospectus/Joint Proxy Statement included in such Registration
Statement. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under, and we do not admit and we
disclaim that we are "experts" for purposes of, the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
KEEFE, BRUYETTE & WOODS, INC.
New York, New York
August 9, 1999
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
(212) 902-1000
PERSONAL AND CONFIDENTIAL
August 9, 1999
Board of Directors
Hudson United Bancorp
1000 MacArthur Boulevard
Mahwah, NJ 07430
Re: Registration Statement on Form S-4 of Hudson United Bancorp
Ladies and Gentlemen:
Reference is made to our opinion letter dated June 28, 1999 with respect to the
fairness from a financial point of view to Hudson United Bancorp ("Hudson
United") of the exchange ratio of 0.95 shares of Common Stock, no par value, of
Hudson United to be exchanged for each share of Common Stock, par value $1.00
per share, of JeffBanks, Inc. ("JeffBanks") pursuant to the Agreement and Plan
of Merger, dated as of June 28, 1999, among Hudson United, Hudson United Bank, a
wholly-owned subsidiary of Hudson United, JeffBanks, Jefferson Bank, a
wholly-owned subsidiary of JeffBanks, and Jefferson Bank of New Jersey, a
wholly-owned subsidiary of JeffBanks.
The foregoing opinion letter was provided for the information of the Board of
Directors of Hudson United in connection with the transaction contemplated
therein and is not to be used, circulated, quoted or otherwise referred to for
any other purpose, nor is it to be filed with, included in or referred to in
whole or in part in any registration statement, proxy statement or any other
document, except in accordance with our prior written consent. We understand
that Hudson United has determined to include our opinion in the above-referenced
Registration Statement.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "Summary - Opinion of Goldman, Sachs & Co." and "The Proposed
Merger - Opinion of Goldman, Sachs & Co." and to the inclusion of the foregoing
opinion in the Joint Proxy Statement/Prospectus included in the above-mentioned
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
GOLDMAN, SACHS & CO.
- --------------------
(Goldman, Sachs & Co.)
HUDSON UNITED BANCORP
PROXY
FOR THE SPECIAL MEETING OF SHAREHOLDERS
Thursday, September 30, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert J. Burke and Charles F.X. Poggi
and each of them, as Proxy, each with full power of substitution, to vote all of
the stock of HUDSON UNITED BANCORP standing in the undersigned's name at the
Special Meeting of Shareholders of HUDSON UNITED BANCORP, to be held at The
Sheraton Crossroads, Crossroad Corporate Center, Route 17 North, Mahwah, NJ
07495 on Thursday, September 30, 1999 at 2:30 p.m., and at any adjournment
thereof. The undersigned hereby revokes any and all proxies heretofore given
with respect to such meeting.
This proxy will be voted as specified below. If no choice is specified,
the proxy will be voted FOR approval of the merger of JeffBanks, Inc. with
Hudson United Bancorp and the adoption of the merger agreement. Shares, if any,
held for your account by the trustee for the dividend reinvestment plan will be
voted in the same manner as you vote the shares in your name individually.
(see reverse side)
<PAGE>
1. Approval of the merger of JeffBanks, Inc. with Hudson United Bancorp and
the adoption of the merger agreement
/ / FOR
/ / AGAINST
/ / ABSTAIN
2. In their discretion, upon such other matters as may properly come before
the meeting.
Dated: ________________, 1999
___________________________
Signature
___________________________
Print Name
___________________________
Signature
___________________________
Print Name
(Please sign exactly as your name appears. When signing as an executor,
administrator, guardian, trustee or attorney, please give your title as such. If
signer is a corporation, please sign the full corporate name and then an
authorized officer should sign his name and print his name and title below his
signature. If the shares are held in joint name, all joint owners should sign.)
PLEASE DATE, SIGN AND RETURN PROMPTLY
JEFFBANKS, INC.
PROXY
FOR THE SPECIAL MEETING OF SHAREHOLDERS
FRIDAY, OCTOBER 1, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Betsy Z. Cohen and Robert B. Goldstein,
and each of them, as Proxy, each with full power of substitution, to vote all of
the stock of JEFFBANKS, INC. standing in the undersigned's name at the Special
Meeting of Shareholders of JEFFBANKS, INC., to be held at The Rittenhouse Hotel,
210 West Rittenhouse Square, Philadelphia, PA 19103, on Friday, October 1, 1999
at 9:30 a.m., and at any adjournment thereof. The undersigned hereby revokes any
and all proxies heretofore given with respect to such meeting.
This proxy will be voted as specified below. If no choice is specified,
the proxy will be voted FOR approval of the merger of JeffBanks, Inc. with
Hudson United Bancorp and the adoption of the merger agreement. Shares, if any,
held for your account by the trustee for the dividend reinvestment plan will be
voted in the same manner as you vote the shares in your name individually.
(see reverse side)
<PAGE>
1. Approval of the merger of JeffBanks, Inc. with Hudson United Bancorp and
adoption of the merger agreement
/ / FOR
/ / AGAINST
/ / ABSTAIN
2. In their discretion, upon such other matters as may properly come before the
meeting.
Dated: ________________, 1999
___________________________
Signature
___________________________
Print Name
___________________________
Signature
___________________________
Print Name
(Please sign exactly as your name appears. When signing as an executor,
administrator, guardian, trustee or attorney, please give your title as such. If
signer is a corporation, please sign the full corporate name and then an
authorized officer should sign his name and print his name and title below his
signature. If the shares are held in joint name, all joint owners should sign.)
PLEASE DATE, SIGN AND RETURN PROMPTLY
