As filed with the Securities and Exchange Commission on August 10, 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. STEVEN R. BLOCK, ESQ.
Pitney, Hardin, Kipp & Szuch Block & Balestri, P.C.
P.O. Box 1945 15851 Dallas Parkway, Suite 1020
Morristown, New Jersey 07962-1945 Addison, Texas 75001
(973) 966-8125 (972) 788-2700
<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, Southern Jersey Bancorp of Delaware, Inc. and Farmers and Merchants
National Bank attached as Appendix A to the Proxy Statement/Prospectus.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. |_|
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 1,516,486 $30.46 $46,186,654 $12,840
Shares*
================================ =============== ========================= =========================== ====================
</TABLE>
* The number of shares of SOJB Common Stock issuable in the Merger in exchange
for shares of Hudson United Bancorp Common Stock at an exchange ratio of 1.260,
as set forth in the Merger Agreement, and assuming that all currently
outstanding options to acquire shares of SOJB 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 $38.375 of the high $38.00 and low $38.75 prices reported by Nasdaq
for JeffBanks as of August 6, 1999, a date within five business days prior to
the filing of this Registration Statement, divided by the 1.260 exchange ratio.
*** $9,689 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>
[SOJB LOGO]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Board of Directors of Southern Jersey Bancorp of Delaware, Inc. has
approved the merger of Southern Jersey into Hudson United Bancorp.
In the merger, Southern Jersey shareholders will receive 1.26 shares of
Hudson United common stock for each share of Southern Jersey common stock.
Hudson United common stock is listed on the New York Stock Exchange under the
symbol "HU". Based on August 10, 1999 closing prices, 1.26 shares of Hudson
United common stock had a value of $_________. Cash will be paid instead of
fractional shares. The 1.26 exchange ratio is subject to adjustments described
in this proxy statement-prospectus.
Southern Jersey shareholders will not be taxed on the exchange of
Southern Jersey stock for Hudson United stock.
The merger cannot be completed unless Southern Jersey's shareholders
approve it. We have scheduled a special meeting so you can vote on the merger.
The Southern Jersey Board of Directors unanimously recommends that you vote to
approve the merger.
The date, time and place of the meeting are as follows:
September 16, 1999
10:00 a.m.
164 West Broad Street
Bridgeton, New Jersey 08302
Only shareholders of record as of July 31, 1999 are entitled to attend
and vote at the meeting.
Your vote is very important. Whether or not you plan to attend the
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. A failure to return the proxy card will in most cases have the same
effect as a vote against the merger.
[Insert Signature]
Clarence D. McCormick
Chairman and Chief Executive Officer
Southern Jersey Bancorp of Delaware, Inc.
<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 proxy statement-prospectus is dated
___________, 1999, and is first being mailed to
Southern Jersey shareholders on __________, 1999.
<PAGE>
Southern Jersey Bancorp of Delaware, Inc.
53 South Laurel Street
Bridgeton, New Jersey 08302
Notice of Special Meeting of Shareholders
to be held September 16, 1999
To the Shareholders of Southern Jersey Bancorp of Delaware, Inc.:
Notice is hereby given that a special meeting of shareholders of
Southern Jersey Bancorp of Delaware, Inc. will be held at 53 South Laurel
Street, Bridgeton, New Jersey 08302 at 10:00 a.m. on September 16, 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, Southern Jersey Bancorp
of Delaware, Inc. and Farmers and Merchants National
Bank, pursuant to which Southern Jersey 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 July 31, 1999
are entitled to receive notice of and to vote at the special meeting or any
adjournments or postponements of the special meeting.
The Southern Jersey Board of Directors unanimously recommends that
shareholders vote "FOR" approval of the merger.
By Order of the Board of Directors,
Clarence D. McCormick
Chairman and Chief Executive Officer
<PAGE>
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE MERGER 2
SUMMARY 3
What this Document is About 3
Voting on the Merger 3
The Merger 3
The Companies 8
SUMMARY FINANCIAL DATA OF
HUDSON UNITED 9
SUMMARY FINANCIAL DATA OF
SOUTHERN JERSEY 12
COMPARATIVE PER SHARE DATA 15
SUMMARY PRO FORMA FINANCIAL
INFORMATION 17
INTRODUCTION 18
FORWARD LOOKING STATEMENTS 18
CERTAIN INFORMATION ABOUT
HUDSON UNITED 19
General 19
Recent Developments 20
CERTAIN INFORMATION ABOUT
SOUTHERN JERSEY 22
General 22
Farmers and Merchants National
Bank 23
Recent Developments 25
THE 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 28
THE PROPOSED MERGER 28
General Description 28
Consideration; Exchange Ratio;
Cash instead of Fractional Shares 28
Conversion of Southern Jersey Options 29
Background of and Reasons for the Merger 30
Interests of Certain Persons in the Merger 32
Opinion of Southern Jersey's Financial
Advisor 33
Resale Considerations Regarding
Hudson United Common Stock 37
Conditions to the Merger 38
Conduct of Business Pending the Merger 39
Stock Option to Hudson United for
Southern Jersey Shares 39
Representations, Warranties and
Covenants 40
Regulatory Approvals 40
Management and Operations
After the Merger 41
Exchange of Certificates 41
Amendments 41
Termination 41
Special Termination Provisions 42
Accounting Treatment of the Merger 44
Federal Income Tax Consequences 44
No Dissenters' Rights 45
PRO FORMA FINANCIAL INFORMATION 46
DESCRIPTION OF HUDSON UNITED
CAPITAL STOCK 53
General 53
Dividend Rights 53
Voting Rights 53
Liquidation Rights 54
Assessment and Redemption 54
Preemptive and Conversion Rights 54
COMPARISON OF THE RIGHTS OF
SHAREHOLDERS OF HUDSON UNITED
AND SOUTHERN JERSEY 54
Voting Requirements 55
Cumulative Voting 56
Classified Board of Directors 57
Rights of Dissenting Shareholders 57
Shareholder Consent to Corporate Action 57
Dividends 58
By-laws 58
Limitations of Liability of Directors
and Officers 58
Consideration of Acquisition Proposals 59
Preferred Stock 59
INFORMATION INCORPORATED BY
REFERENCE 60
OTHER MATTERS 61
LEGAL OPINION 62
EXPERTS 62
APPENDIX A Merger Agreement A-1
APPENDIX B Stock Option Agreement B-1
APPENDIX C First Capital Fairness Opinion C-1
<PAGE>
HOW TO GET COPIES OF RELATED DOCUMENTS
This document incorporates important business and financial information
about Hudson United Bancorp and Southern Jersey Bancorp of Delaware, Inc. that
is not included in or delivered with this document. Southern Jersey 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, New Jersey; telephone number (201) 236-2641. For Southern
Jersey documents, make your request to Paul J. Ritter, III, Assistant Corporate
Secretary, Southern Jersey Bancorp of Delaware, Inc., 53 South Laurel Street,
Bridgeton, New Jersey 08302; telephone number (856) 453-3126. We will respond to
your request within one business day by sending the requested documents by first
class mail or other equally prompt means. In order to ensure timely delivery of
the documents in advance of the meeting, any request should be made by September
9, 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 Southern
Jersey 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 Southern Jersey 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 Southern
Jersey'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: 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 Southern Jersey's control.
Q: Whom should I call with questions or to obtain additional copies of
this document?
A: You should contact:
Paul J. Ritter, III
Southern Jersey Bancorp of Delaware, Inc.
53 South Laurel Street
Bridgeton, NJ 08302
(856) 453-3126
<PAGE>
SUMMARY
This is a summary of certain information regarding the proposed merger
and the shareholder meeting 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 proxy statement-prospectus,
including the appendixes, before deciding how to vote.
What this Document is About
The Board of Directors of Southern Jersey Bancorp of Delaware, Inc. has
approved the merger of Southern Jersey into Hudson United Bancorp. The merger
cannot be completed unless the shareholders of Southern Jersey approve it. The
Southern Jersey Board has called a special meeting of Southern Jersey
shareholders to vote on the merger. This document is the proxy statement used by
the Southern Jersey Board to solicit proxies for the meeting. It is also the
prospectus of Hudson United regarding the Hudson United common stock to be
issued if the merger is completed.
Voting on the Merger
Shares Entitled to Vote
(see page 26)............. Southern Jersey has selected July 31, 1999 as the
record date for the meeting. Each of the 1,128,081
shares of Southern Jersey common stock outstanding
on the record date are entitled to vote at the
meeting.
Vote Required to Approve
the Merger (see page 26).... The affirmative vote of a majority of the
outstanding stock of Southern Jersey entitled to
vote is required to approve the merger. The
Southern Jersey Board of Directors has unanimously
approved the merger agreement and unanimously
recommends that Southern Jersey shareholders vote
"FOR" the merger agreement.
The Merger
General Description (see
page 28).................. Southern Jersey 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
Southern Jersey agree on a different closing date.
The terms of the proposed merger are set forth in
a merger agreement signed by Southern Jersey and
Hudson United and their bank subsidiaries. A copy
of the merger agreement is attached as Appendix A
to this document and is incorporated herein by
reference.
Consideration to Southern
Jersey Shareholders; 1.26
Exchange Ratio (see page 28) In the merger, you will receive 1.26 shares of
Hudson United common stock for each share of
Southern Jersey common stock that you own. If
there is any stock split, stock dividend or
similar transaction affecting Hudson United common
stock prior to the closing, the 1.26 exchange
ratio will be adjusted appropriately. The exchange
ratio may also be adjusted as summarized under
"Terminating the Merger Agreement" on page 41 and
as more fully described under "Special Termination
Provisions" on pages 42-44.
No Federal Income Tax on
Shares Received in the
Merger (see page 44)........ Hudson United's counsel, Pitney, Hardin, Kipp &
Szuch, has delivered its opinion that the merger
will qualify as a tax-free reorganization for
federal income tax purposes. The conversion of
Southern Jersey stock into Hudson United stock
will be tax-free for Hudson United, Southern
Jersey and the Southern Jersey shareholders.
Southern Jersey 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 each Southern Jersey shareholder
will be the basis of the Southern Jersey common
stock converted in connection with the merger. The
holding period of the Hudson United common stock
will include the holding period of the Southern
Jersey common stock converted.
We urge you to read the more complete description
of the merger's tax consequences on page 44 and to
consult your own tax advisors regarding the
specific tax consequences of the merger to you
under applicable tax laws.
Opinion of Southern
Jersey's Financial Advisor
(see page 33)............... First Capital Group, LLC is Southern Jersey's
financial advisor on the merger. As of the date of
this proxy statement, First Capital considers the
merger to be fair to Southern Jersey shareholders
from a financial point of view. A copy of First
Capital's opinion is included as Appendix C to
this document. For information on how First
Capital arrived at its opinion, see pages 33-37.
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
Southern Jersey common stock is traded on the
NASDAQ Over-the-Counter Bulletin Board under the
symbol "SOJB". The following table list the last
sale prices of Hudson United common stock and
Southern Jersey common stock on June 28, 1999, the
last day before the merger agreement was
announced, and on August 10, 1999, a date shortly
before the date of this proxy statement. The table
also presents the equivalent value of Hudson
United common stock per Southern Jersey share,
computed by multiplying the last sale price of
Hudson United common stock on the dates indicated
by the 1.26 exchange ratio. We urge you to obtain
current market quotations for Hudson United common
stock and Southern Jersey common stock. Because
the exchange ratio is fixed and trading prices
fluctuate, Southern Jersey shareholders are not
assured of receiving any specific market value of
Hudson United common stock.
<TABLE>
<CAPTION>
Closing Sale Equivalent Value of
Closing Sale Price Per Share Hudson United Common
Price Per Share of Southern Stock Per Share of
of Hudson United Jersey Southern Jersey
Common Stock Common Stock Common Stock
------------ ------------ ------------
<S> <C> <C> <C>
Date
June 28, 1999.......... $ 34.94 $ 23.75 $ 44.02
August 10, 1999........
</TABLE>
Cash Instead of Fractional
Shares (see page 28)........ You will not receive fractional shares of Hudson
United common stock in the merger. Instead you
will receive, without interest, cash equal to the
fractional share interest you otherwise would have
received, multiplied by the value of Hudson United
common stock. For this purpose, Hudson United
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 (see
page 45).................... You do not have dissenters' rights of appraisal in
connection with the merger.
Exchanging Your Stock
Certificates (see page 41).. Promptly after the merger occurs, the exchange
agent will send you letters of transmittal and
instructions for exchanging your Southern Jersey
stock certificates into Hudson United stock
certificates. You should not send in your stock
certificates until you receive instructions from
the exchange agent.
Reselling the Stock You
Receive in the Merger (see
page 37).................... 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, you
may freely transfer those shares after you receive
them. Southern Jersey has identified its
directors, executive officers and others who may
be deemed its "affiliates." Those persons have
entered into agreements restricting their ability
to transfer the shares they will get in the
merger.
Conversion of Southern
Jersey Stock Options (see
page 29).................... In the merger, holders of options to purchase
Southern Jersey common stock will receive Hudson
United common stock in exchange for their options.
Differences in
Share-holders' Rights (see
page 54).................... In the merger, you will become a Hudson United
shareholder. Your rights as a Southern Jersey
shareholder are currently governed by Delaware
corporate law and Southern Jersey's certificate 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 Southern
Jersey and Hudson United shareholders differ with
respect to voting requirements and various other
matters. See pages 54-60.
Reasons for the Merger (see
page 30).................... As part of Southern Jersey's strategic review,
which included working with a consultant, Southern
Jersey determined that because of its need to
raise additional capital if it were to remain
independent, and the benefits associated with a
merger with a larger institution, its interests
were best served by a merger with Hudson United.
Hudson United entered into the merger agreement as
part of Hudson United's ongoing strategy of growth
through acquisitions.
Financial Interests of
Southern Jersey's Directors
and Officers in the
Merger(see page 32)......... Some of Southern Jersey's directors and officers
have interests in the merger that are in addition
to their interests as shareholders. Both Clarence
D. McCormick, the Chairman and CEO of Southern
Jersey, and Clarence D. McCormick, Jr., the
President of Southern Jersey, will be employed by
Hudson United from the closing date of the merger
to December 31, 1999. Clarence D. McCormick and
Clarence D. McCormick, Jr. have also agreed to
enter into agreements at the closing which will
prohibit each of them from working for a
competitor of Hudson United for a period of three
years from January 1, 2000 to December 31, 2002.
In consideration of the execution of these
agreements, Hudson United will pay each their
respective annual salary in effect immediately
prior to the closing, during the three-year
non-compete period. Also, James Mack, the CEO of
Farmers and Merchants National Bank will receive a
lump sum severance payment of $265,000 after the
merger. All of the interests which directors and
officers have in the merger are fully described
under "Interests of Certain Persons in the Merger"
on pages 32-33.
The merger agreement provides that Hudson United
will indemnify the directors and officers of
Southern Jersey against certain liabilities for a
six-year period following completion of the
merger.
At the July 31, 1999 record date, directors and
executive officers of Southern Jersey and their
affiliates beneficially owned 400,618 shares or
35.5% of the Southern Jersey common stock.
For additional information on the benefits of the
merger to Southern Jersey management, see pages
32-33.
<PAGE>
Conditions to the Merger
(see page 38)............... Completion of the merger is contingent on a number
of conditions, including:
o Approval of the merger by Southern Jersey
shareholders at the meeting
o Receipt of bank regulatory approvals
o Receipt of an updated opinion from Hudson
United's counsel regarding the tax-free
nature of the merger; this condition will not
be waived without resoliciting the vote of
Southern Jersey shareholders
o Receipt of a letter from Hudson United's
independent public accountants regarding
qualification of the merger for
pooling-of-interests accounting and
o Receipt of a fairness opinion from First
Capital Group, LLC, which is attached to this
proxy statement-prospectus.
Regulatory Approval (see
page 40).................... Completion of the merger is subject to obtaining
all the necessary regulatory approvals from the
FDIC and the New Jersey Department of Banking and
Insurance. 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 Southern
Jersey 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 Southern Jersey.
Terminating the Merger
Agreement (see page 41)..... Southern Jersey has the right to terminate the
Merger Agreement if, between June 25, 1999 and the
fifth business day prior to 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 Southern Jersey 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 Southern Jersey or Hudson
United if the merger is not effected by April 30,
2000. For a more complete description of these and
other termination rights available to Southern
Jersey and Hudson United, see pages 41-44.
Amending the Merger
Agreement (see page 41)..... Hudson United and Southern Jersey may amend the
merger agreement any time before the merger is
completed. However, an amendment to decrease the
exchange ratio and certain other types of
amendments cannot be made following adoption of
the merger agreement by Southern Jersey
shareholders without obtaining their approval.
Pooling Accounting
Treatment of the Merger
(see page 44)............... Hudson United expects to account for the merger as
a pooling-of-interests for financial reporting
purposes. One of the conditions to Hudson United's
and Southern Jersey's obligations to close the
merger is that Hudson United receives a letter
from its independent public accountants regarding
qualification of the merger for pooling accounting
treatment.
Southern Jersey has Agreed
Not to Solicit Alternative
Transactions (see page 39).. Southern Jersey has agreed not to encourage,
negotiate with, or provide any information to any
person other than Hudson United concerning an
acquisition transaction involving Southern Jersey
or Farmers and Merchants National Bank until the
merger is completed or the merger agreement is
terminated. However, Southern Jersey 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 Southern Jersey.
Southern Jersey has Granted
Hudson United a Stock Option
and Hudson United has
Granted Southern Jersey A Put
Option (see page 39)......... As a condition to Hudson United entering into the
merger agreement, Hudson United required that
Southern Jersey grant Hudson United a stock option
that was designed to deter other companies from
attempting to acquire control of Southern Jersey.
The option gives Hudson United the right to
purchase for $24.00 per share up to 200,000 shares
of Southern Jersey common stock, representing
approximately 17.7% of the outstanding Southern
Jersey shares when the option was granted. Hudson
United's 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.
Also under the stock option, Southern Jersey
required that Hudson United grant to Southern
Jersey the right to require Hudson United to
purchase 200,000 Southern Jersey shares for $24.00
per share. Southern Jersey's "put" is exercisable
in whole for six months following termination of
the merger agreement by either Hudson United or
Southern Jersey for any reason.
Hudson United could recognize a gain if it
purchases the shares subject to the options and
resells the shares for more than the exercise
price. The existence of the option may deter other
potential acquirors of control of Southern Jersey,
because it would probably increase the cost of
acquiring all the shares of Southern Jersey common
stock. Hudson United's exercise of its option
could also make pooling-of-interests accounting
treatment unavailable to a subsequent acquiror.
The agreement granting the option and the put is
set forth as Appendix B to this document.
The Companies
Hudson United (see page 19) 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
Southern Jersey (see page
22)......................... Southern Jersey, a Delaware corporation, is the
bank holding company for The Farmers and Merchants
National Bank of Bridgeton. The Farmers and
Merchants National Bank is a national bank that
operates 17 branches located in Cumberland, Salem
and Gloucester counties, New Jersey. Southern
Jersey lost $7.8 million in 1998. At March 31,
1999, Southern Jersey had $465 million in assets.
Southern Jersey's principal executive offices are
located at 53 South Laurel Street, Bridgeton, New
Jersey 08302. Southern Jersey's telephone number
is (856) 453-3000. Farmers and Merchants is
subject to a consent order with the Office of the
Controller of the Currency and Southern Jersey is
subject to a memorandum of understanding with the
Federal Reserve.
<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 pages 10-11.
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 SOUTHERN JERSEY
The following is a summary of certain selected historical consolidated
financial data for Southern Jersey. The data presented for the years 1994
through 1998, and as of the end of those years, comes from Southern Jersey's
audited consolidated financial statements. The data presented as of and for the
three months ended March 31, 1999 and 1998 comes from Southern Jersey's
unaudited consolidated financial statements. Southern Jersey'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. Southern Jersey's
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
pages 13-14.
In the opinion of Southern Jersey'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 $ 33,283 $ 33,800 $ 30,390 $ 28,212 $ 24,616
Interest expense 18,400 17,159 14,870 13,114 10,731
------------- ------------ ------------- ------------ ------------
Net interest income 14,883 16,641 15,520 15,098 13,885
Provision for possible loan losses 15,270 7,967 1,805 1,266 725
------------- ------------ ------------- ------------ ------------
Net interest income after provision
for possible loan losses (387) 8,674 13,715 13,832 13,160
Other income 3,509 3,043 3,246 2,743 2,308
Other expenses 15,842 11,590 10,357 10,023 9,580
------------- ------------ ------------- ------------ ------------
Income before income taxes (12,720) 127 6,604 6,552 5,888
Income tax provision (4,888) (710) 1,276 1,700 1,411
============= ============ ============= ============ ============
Net income $ (7,832) $ 837 $ 5,328 $ 4,852 $ 4,477
============= ============ ============= ============ ============
Share Data:
Weighted average common shares
Outstanding (in thousands):
Basic 1,127 1,124 1,118 1,118 1,132
Diluted 1,127 1,120 1,118 1,128 1,129
Basic earnings per share $ (6.95) $ 0.75 $ 4.77 $ 4.30 $ 3.97
Diluted earnings per share (6.95) 0.73 4.67 4.26 3.95
Cash dividends per common share 0.29 1.16 1.07 0.97 0.93
Book value per common share 28.46 35.20 35.58 32.79 28.76
Balance Sheet Summary:
Securities held to maturity $ 0 $ 55,415 $ 61,765 $ 80,566 $ 117,728
Securities available for sale 98,974 37,278 34,904 33,754 20,416
Loans 268,894 305,556 290,885 232,113 192,518
Total assets 482,665 483,354 430,324 404,240 372,896
Deposits 445,566 438,464 385,384 363,433 337,223
Stockholders' equity 32,089 39,559 39,751 36,643 32,555
Performance Ratios:
Return on average assets (1.63) % 0.18 % 1.25 % 1.27 % 1.23 %
Return on average equity (23.18) 1.91 13.39 13.11 14.47
Dividend payout (4.32) 160.00 23.06 22.57 23.47
Average equity to average assets 7.04 9.39 9.36 9.66 8.49
Net interest margin 3.36 3.84 3.89 4.22 4.09
Asset Quality Ratios:
Allowance for possible loan losses 3.77 % 1.71 % 1.10 % 1.04 % 1.11 %
to total loans
Allowance for possible loan losses
to non-performing loans 60 82 89 37 63
Non-performing loans to total loans
6.27 2.10 1.23 2.80 1.77
Non-performing assets to total
loans, plus other real estate 7.28 2.68 1.91 3.19 2.33
Net charge-offs to average loans 3.57 1.96 0.39 0.47 0.42
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
At or for the Three Months ended March 31,
-------------------------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Earnings Summary:
Interest income $ 7,338 $ 8,397
Interest expense 4,191 4,553
-------------- --------------
Net interest income 3,147 3,844
Provision for possible loan losses 566 1,200
-------------- --------------
Net interest income after provision for possible 2,581 2,644
loan losses
Other income 1,426 855
Other expenses 3,652 3,467
-------------- --------------
Income before income taxes 355 32
Income tax provision 99 10
============== ==============
Net income $ 256 $ 22
============== ==============
Share Data:
Weighted average common shares
Outstanding (in thousands):
Basic 1,127 1,094
Diluted 1,127 1,094
Basic earnings per share .23 .02
Diluted earnings per share .23 .02
Cash dividends per common share 0 0
Book value per common share 27.49 36.08
Balance Sheet Summary:
Securities held to maturity 0 58,105
Securities available for sale 106,140 35,237
Loans 240,782 295,517
Total assets 465,446 477,606
Deposits 429,429 432,434
Stockholders' equity 30,985 39,469
Performance Ratios:
Return on average assets .22 % .02 %
Return on average equity 3.30 0.22
Dividend payout 0 0
Average equity to average assets 6.41 7.91
Net interest margin 2.95 3.50
Asset Quality Ratios:
Allowance for possible loan losses to total Loans
3.87 % 2.05 %
Allowance for possible loan losses to
non-performing loans 36 57
Non-performing loans to total loans 10.86 3.59
Non-performing assets to total loans, plus Other
real estate 11.90 4.24
Net charge-offs to average loans 2.21 .50
</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 Southern Jersey 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 Southern Jersey. We have computed the Southern Jersey pro forma equivalent
per share data by multiplying the pro forma combined per share data (giving
effect to the merger) by the 1.26 exchange ratio used in the merger. The
historical per share data was derived from the financial statements of Hudson
United and Southern Jersey that are incorporated by reference herein. The pro
forma combined share data were derived after giving effect to the merger as if
it occurred at the beginning of the period presented using the
pooling-of-interests method of accounting. The pro forma information is not
necessarily indicative of the results of operations which would have been
achieved had the merger been consummated as of the beginning of the periods for
which such data are presented and should not be construed as being
representative of future periods. The pro forma combined information does not
include the effects of Hudson United's other pending or recently completed
acquisitions or one-time merger related and restructuring charges. See "Certain
Information about Hudson United - Recent Developments" on page 25-26.
The historical per share data for Hudson United has been restated to
retroactively reflect the effect of stock dividends and stock splits. See "Pro
Forma Financial Information" on pages 17-18; "Summary Financial Data of Hudson
United" on page 9; and "Summary Financial Data of Southern Jersey" on page 12.
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 Southern Jersey common stock, equal
to its historical cash dividends per share declared on Hudson United common
stock.
<TABLE>
<CAPTION>
Pro Forma
Equivalent
per
Historical Historical Southern
Hudson Southern Pro Forma Jersey Share
United Jersey Combined
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Three months Ended March 31, 1999
Net Income Per Share
Basic........................... $.62 $.23 $.60 $.76
Diluted......................... .61 .23 .59 .74
Book Value Per Share..................... 10.79 27.48 11.17 14.07
Cash Dividends Per Share................. .25 -- .25 .31
Year Ended December 31, 1998
Net Income (Loss) Per Share
Basic........................... .57 (6.95) .36 .45
Diluted......................... .56 (6.95) .36 .45
Cash Dividends Per Share................. .88 .29 .88 1.11
Year Ended December 31, 1997
Net Income Per Share
Basic........................... 1.67 .75 1.64 2.07
Diluted......................... 1.60 .73 1.57 1.98
Cash Dividends Per Share................. .73 1.16 .73 .92
Year Ended December 31, 1996
Net Income Per Share
Basic........................... .85 4.77 .94 1.18
Diluted......................... .82 4.67 .91 1.15
Cash Dividends Per Share................. .64 1.07 .64 .81
</TABLE>
The first table below presents, for the periods indicated, the high and
low closing prices per share of Hudson United common stock and Southern Jersey
common stock. The closing prices of Hudson United common stock have been
restated to give retroactive effect to stock dividends and stock splits. The
second table presents information concerning the last closing price of Hudson
United common stock and of Southern Jersey common stock on June 28, 1999, the
last business day before the merger was announced, and on August 10, 1999, a
date shortly before the date of this proxy statement-prospectus. The second
table also presents the equivalent value of Hudson United common stock per
Southern Jersey share which is computed by multiplying the last closing price of
Hudson United common stock on the dates indicated by the 1.26 exchange ratio.
Hudson United common stock is listed on the New York Stock Exchange under the
symbol "HU" and Southern Jersey common stock is traded on the NASDAQ
Over-the-Counter Bulletin Board under the symbol "SOJB". We urge you to obtain
current market quotations for Hudson United common stock and Southern Jersey
common stock. Because the exchange ratio is fixed and trading prices fluctuate,
Southern Jersey shareholders are not assured of receiving any specific market
value of Hudson United common stock, although Southern Jersey has certain price
related termination provisions. See "Special Termination Provisions" on pages
42-44. 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 Southern Jersey shareholders meet to
vote on the merger.
<TABLE>
<CAPTION>
Closing Sale Price Per Share of Hudson Closing Sale Price Per Share of
United Southern Jersey
Common Stock Common Stock
------------ ------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1997:
First Quarter...................... $ 25.03 $ 21.44 $ 44.23 $ 38.84
Second Quarter..................... 27.57 20.86 44.66 41.26
Third Quarter...................... 31.11 26.16 45.63 43.69
Fourth Quarter..................... 37.99 30.05 60.19 44.90
1998:
First Quarter...................... $ 37.86 $ 32.28 $ 61.17 $ 58.25
Second Quarter..................... 37.62 31.25 61.17 48.54
Third Quarter...................... 35.00 25.38 48.54 40.78
Fourth Quarter..................... 30.13 21.63 41.99 32.25
1999:
First Quarter...................... $ 34.25 $ 29.75 $ 32.00 $ 27.00
Second Quarter..................... 36.00 30.63 37.75 21.75
Third Quarter (through August 10,
1999)..............................
<CAPTION>
Equivalent
Common Stock Per
Closing Sale Closing Sale Value of Hudson United
Price Per Share Price Per Share Common Stock Per
of Hudson United of Southern Jersey Share of Southern Jersey
Common Stock Common Stock Common Stock
------------ ------------ ------------
<S> <S> <C> <C>
Date
June 28, 1999................... $34.94 $23.75 $44.02
August 10, 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 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 46-52. The summary pro forma
financial information is based on the historical financial statements of Hudson
United and Southern Jersey incorporated by reference herein. See pages 46-52.
The Summary Pro Forma Financial Information assumes a 1.26 exchange ratio.
Hudson United's historical earnings per share have been restated to give
retroactive effect to stock dividends and splits. The pro forma combined
information does not include the effect of the pending merger of Hudson United
with JeffBanks or the pending acquisition of loans and deposits from Advest Bank
or the recently completed acquisition of Little Falls Bancorp. The pro forma
financial information does not give effect to anticipated cost savings net of
expected merger related expenses and restructuring charges. The historical
amounts presented in future financial statements of Hudson United for periods
reported in this proxy statement 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 JeffBanks, when consummated, as pooling of interests. See
"Certain Information about Hudson United - Recent Developments" on page 20-22.
The Summary Pro Forma Financial Information should be read in
conjunction with the Pro Forma Financial Information and the related notes
thereto on pages 51-52 and the consolidated financial statements and related
notes incorporated by reference in this document. The Summary Pro Forma
Financial Information does not necessarily indicate the results of operations
which would have been achieved had the merger been consummated as of the
beginning of the periods for which the 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> <C>
Net interest income before provision for possible loan losses.. $ 65,694 $ 269,077 $ 271,576 $ 257,468
Provision for possible loan losses............................. 3,066 29,644 20,742 18,945
Net interest income after provision for possible loan losses... 62,628 239,433 250,834 238,523
Income before income taxes..................................... 38,202 28,303 115,159 66,990
Net income..................................................... 24,857 15,319 70,664 42,224
Earnings per share
Basic..................................................... .60 .36 1.64 .94
Diluted................................................... .59 .36 1.57 .91
<CAPTION>
As of March 31,
1999
-------------------
<S> <C>
Balance Sheet:
Total assets................................................... $ 7,511,513
Total deposits................................................. 5,361,396
Total stockholders' equity..................................... 458,154
Book value per common share.................................... 11.17
</TABLE>
<PAGE>
INTRODUCTION
The Board of Directors of Southern Jersey Bancorp of Delaware, Inc. and
Hudson United Bancorp have approved an Agreement and Plan of Merger, dated as of
June 28, 1999, among Hudson United, Hudson United's bank subsidiary, Hudson
United Bank, Southern Jersey and Southern Jersey's bank subsidiary, The Farmers
and Merchants National Bank of Bridgeton. The merger agreement was amended to
clarify an issue about the conversion of options. The merger agreement provides
for Southern Jersey to be merged with Hudson United, with Hudson United as the
surviving corporation. The merger cannot be completed unless the shareholders of
Southern Jersey approve it.
This document serves two purposes. It is the proxy statement being used
by the Southern Jersey Board to solicit proxies for use at a special Southern
Jersey shareholders' meeting called by the Board to seek approval of the merger
agreement. It is also the prospectus of Hudson United regarding the Hudson
United common stock to be issued if the merger is completed. Thus, we sometimes
refer to this document as the 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
herein by reference. We urge you to read this entire document and the appendixes
carefully.
All information and statements contained or incorporated by reference
in this document about Southern Jersey were supplied by Southern Jersey and all
information and statements contained or included by reference in this document
about Hudson United were supplied by Hudson United.
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 Southern Jersey. These statements are not
historical facts and include expressions about Hudson United's and/or Southern
Jersey's
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 effectively
address Year 2000 computer problems; and
o general economic conditions, either nationally or in the states in
which Hudson United operates, are less favorable than expected.
Neither Hudson United nor Southern Jersey 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.
JeffBanks Pending Acquisition. On June 29, 1999, Hudson United also
announced that it entered into a definitive agreement to acquire JeffBanks,
Inc., under which Hudson United will acquire JeffBanks 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 JeffBanks merger agreement, each share of
JeffBanks common stock will be exchanged for 0.95 shares of Hudson United common
stock. JeffBanks is a $1.7 billion holding company with 32 branches located
throughout the greater Philadelphia area of Pennsylvania and southern New
Jersey. JeffBanks, as of March 31, 1999, had approximately $1.265 billion in
total loans, $1.25 billion in total deposits and $133.0 million in stockholders'
equity. The transaction is expected to close in the fourth quarter of 1999.
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.
<TABLE>
<CAPTION>
Pending Acquisitions
Asset Size Projected
Institution (in millions) (1) Type of Consideration Closing Date
- ---------------------------------------------------------- ----------------------------------- --------------------
<S> <C> <C> <C>
JeffBanks, Inc., Philadelphia, $ 1,684 Approximately 10,000,000 shares Fourth Quarter
Pennsylvania, and its of Hudson United Common 1999
subsidiaries, including Jefferson Stock(2)
Bank, Jefferson Bank of New
Jersey
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 0.95 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 the Current Report on Form 8-K reporting 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 60.
At the time of the announcement of a significant transaction, Hudson
United sometimes 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.
CERTAIN INFORMATION ABOUT SOUTHERN JERSEY
General
Southern Jersey Bancorp of Delaware, Inc., a Delaware corporation and a
bank holding company, was organized under the laws of the State of Delaware on
June 9, 1989. On July 17, 1989, Southern Jersey acquired all the outstanding
common shares of Southern Jersey Bancorp, a bank holding company organized under
the laws of the State of New Jersey (a predecessor corporation to Southern
Jersey) in a merger transaction in which the predecessor corporation was merged
with and into Southern Jersey.
Southern Jersey's principal executive offices and telephone number are:
53 South Laurel Street
Bridgeton, New Jersey 08302
(856) 453-3000
During 1998, Southern Jersey suffered substantial losses and Southern
Jersey and its subsidiary, Farmers and Merchants, 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. On August 4, 1999, Southern Jersey was notified by the OCC
that it was waiving four items required by the OCC in the consent order as a
result of the proposed merger with Hudson United. Included in those four items
was the requirement that Southern Jersey achieve a 6% leverage ratio by
September 30, 1999. The waiver is conditioned on completion of the merger. If
the merger is not completed for any reason whatsoever, the original consent
order will remain in full force and effect and Southern Jersey will be required
to comply with each of the requirements of the original consent order. If the
merger is not completed, Southern Jersey will be required to comply with these
requirements within the time frames required by the original consent order,
except that Southern Jersey would have 90 days to comply with the 6% leverage
ratio requirement.
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, 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 if the merger closes it will sell all of
the non-performing assets and certain other identified loans of Southern Jersey
aggregating approximately $55 million 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.
In the event the merger with Hudson United does not occur, Southern
Jersey's management anticipates it would have difficulty complying with the
terms of the bank regulatory actions without outside financial assistance. As a
result, the stock option with Hudson United provides a put option under which
Hudson United may be required to purchase 200,000 shares of Southern Jersey at
$24 a share within six months after the termination of the merger agreement.
Farmers and Merchants National Bank
Southern Jersey's wholly-owned subsidiary, The Farmers and Merchants
National Bank of Bridgeton, is a commercial bank which was organized under the
laws of the United States in 1909. Farmers and Merchants has three wholly-owned
subsidiaries, F&M Investment Company, Woulf Asset Holdings, Inc., and AMFDCM,
Inc. F&M Investment Company was organized under the laws of the State of
Delaware in 1984 for the purpose of holding and managing investment securities.
Woulf Asset Holdings, Inc. and AMFDCM, Inc. were organized under the laws of the
State of New Jersey in 1996 for the purpose of holding and managing real estate.
Farmers and Merchants is a full service commercial bank which provides
a wide range of banking services for its customers, including checking accounts,
negotiable order of withdrawal ("NOW") accounts, individual retirement accounts
("IRAs"), savings and other time deposits of various types, and business, real
estate, personal use, home improvement, automobile, and a variety of other
loans, as discussed more fully below. Other services include letters of credit,
safe deposit boxes, bank money orders, traveler's checks, credit cards, wire
transfer, electronic banking, night deposit, and drive-in facilities. Prices and
rates charged for services offered are competitive with the area's existing
financial institutions.
Farmers and Merchants offers a wide variety of fixed and variable rate
loans to qualified borrowers. Farmers and Merchants offers interest rates
competitive with the other financial institutions in its market area. Farmers
and Merchants offers the following types of loans:
o Consumer Loans. Farmers and Merchants' consumer loans consist of
automobile, mobile home, recreational vehicle, and boat loans;
home improvement and second-mortgage loans; secured and unsecured
personal expense loans; and educational and government-sponsored
student loans;
o Real Estate Loans. Farmers and Merchants' real estate loans
consist of residential first and second mortgage loans on
one-to-four family homes; construction and development loans;
multiple dwelling unit loans; housing rehabilitation loans; loans
to purchase developed real property; and commercial real estate
loans;
o Commercial Loans (Secured and Unsecured). Farmers and Merchants'
commercial loans consist of working capital loans, accounts
receivable loans, and inventory loans to small businesses; and
o Mortgage Lending. Farmers and Merchants offers 15- and 30-year
fixed and adjustable rate conventional and jumbo home mortgages.
The Bank sells all mortgage loans in the secondary market and does
not retain the servicing rights thereon.
Lending authority is delegated by Farmers and Merchants' board of
directors to loan officers, each of whom is limited as to the amount of secured
and unsecured loans that he or she can make to a single borrower or related
group of borrowers. Farmers and Merchants provides written guidelines for
lending activities. Secured loans, except indirect installment loans which are
generally secured by the vehicle purchased, are made to persons who are well
established and have net worth, collateral, and cash flow to support the loan.
Real estate loans usually are made only when such loans are secured by real
property located in the bank's primary market. Unsecured loans, except credit
card loans, are normally made by Farmers and Merchants only to existing
customers.
Under certain circumstances, Farmers and Merchants takes investment
securities as collateral for loans. If the purpose of the loan is to purchase or
carry margin stock, the bank will not advance loan proceeds of more than 50% of
the market value of the stock serving as collateral. If the loan proceeds will
be used for purposes other than purchasing or carrying margin stock, the bank
generally will lend up to 50% of the current market value of the stock serving
as collateral.
Farmers and Merchants loans to businesses for working capital which are
expected to be repaid out of the current earnings of the commercial entity. The
ability of the borrower to service its debt is dependent upon the success of the
commercial enterprise. It is Farmers and Merchants' policy to secure these
loans.
For loans that are collateralized by inventory, furniture, fixtures and
equipment of small business, Farmers and Merchants does not generally advance
loan proceeds of more than 50% of the inventory value and more than 50% of the
furniture, fixtures and equipment value serving as collateral. When inventory
serves as primary collateral, accounts receivable generally will also be taken
as collateral. Maximum collateral values for accounts receivable are recognized
as follows: 70% for receivables outstanding 60 days or less; 0% for receivables
outstanding 61 to 90 days; and no collateral value will be assigned for accounts
receivable outstanding past 90 days.
Many of the Farmers and Merchants' commercial loans are secured by real
estate because such collateral may be superior to other types of collateral
owned by small businesses. Loans secured by commercial real estate, however, are
subject to certain inherent risks. Commercial real estate may be substantially
illiquid, and commercial values are difficult to ascertain and are subject to
wide fluctuations depending upon economic conditions. Farmers and Merchants
requires that qualified outside appraisers determine the value of any commercial
real estate taken as collateral, and Farmers and Merchants will generally lend
the lesser of 75% of the appraised value or the purchase price of the real
estate.
Recent Developments
Farmers and Merchants had a net loss of $256,000 for the first six
months of 1999 as compared to net loss of $218,000 for the comparable period of
1998. The increase in the net loss is primarily a result of the decrease in
interest income resulting from the increased amount of non-performing loans
experienced by Farmers and Merchants during this period. The increase in
non-performing loans caused Farmers and Merchants to incur additional legal and
professional expenses to collect them. Finally, the proceeds realized by Farmers
and Merchants from the sale of approximately $19,700,000 of marine loans were
re-deployed into lower yielding federal fund investments as opposed to higher
interest yielding loans.
Farmers and Merchants had $242,194,000 in total loans at June 30, 1999
as compared to $289,582,000 in total loans at June 30, 1998. The 16.4% decrease
in total loans for the first six months of 1999 is a result of Farmers and
Merchants tightening of credit standards and the continued implementation of its
revised loan policy with its stricter underwriting guidelines.
Farmers and Merchants had interest income from its loans and investment
securities of $14,499,000 for the first six month period ended June 30, 1999 as
compared to $17,264,000 for the comparable period in 1998. This 19.1% decrease
in interest income is primarily attributable to the $47,388,000 decrease in
loans at Farmers and Merchants. As a result of fewer loans booked at Farmers and
Merchants, its net interest income fell 33.7% from $8,109,000 for the first six
months of 1998 to $6,064,000 for the comparable period in 1999.
Farmers and Merchants' non-interest income held steady for the first
six months of 1999 with Farmers and Merchants earning $1,721,000 as compared to
$1,739,000 during the first six months of 1998.
Farmers and Merchants' non-interest expense increased for the first six
months of 1999 with Farmers and Merchants expensing $7,534,000 as compared to
$7,166,000 during the first six months of 1998. This increase was primarily a
result of a $303,000 increase in legal and professional fees experienced in the
first six months of 1999 as compared to the comparable period in 1998.
Farmers and Merchants had $419,109,000 in total deposits for the first
six months of 1999 as compared to $438,956,000 for the first six months of 1998.
This 4.7% decrease is primarily a result of Farmers and Merchants lowering the
interest rates it paid on its deposits in the second quarter of 1999.
The increase in Farmers and Merchants' Allowance for Loan and Lease
Losses of $2,128,000 from $7,054,000 as of June 30, 1998 to $9,182,000 as of
June 30, 1999 was a result of the $9,476,000 (108.8%) increase in non-performing
loans experienced by Farmers and Merchants in the first six months 1999 as
compared to the first six months of 1998. The increase in the amount of loans on
non-performing status is a result of Farmers and Merchants' internal loan review
of its commercial portfolio and the classifications resulting therefrom.
The following discussion contains forward-looking statements and
Farmers and Merchants' actual results may differ significantly from those
projected in the forward-looking statements.
THE MEETING
Date, Time and Place
This document solicits, on behalf of the Southern Jersey Board, proxies
to be voted at a special meeting of Southern Jersey shareholders and at any
adjournments or postponements thereof. The meeting is scheduled for:
September 16, 1999
10:00 a.m.
164 West Broad Street
Bridgeton, New Jersey 08302
Purpose
At the meeting, Southern Jersey 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 Southern Jersey 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 Southern Jersey Board has fixed the close of business on July 31,
1999 as the record date for the meeting. Only holders of record of Southern
Jersey common stock at that time are entitled to get notice of the meeting and
to vote at the meeting. On the record date, there were 1,128,081 shares of
Southern Jersey 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 Southern Jersey shareholder
approval. The affirmative vote of a majority of the outstanding stock of
Southern Jersey entitled to vote is required to approve the merger agreement. A
failure to return the proxy card or to vote in person at the meeting will have
the same effect as a vote against the merger.
On the July 31, 1999 record date, the directors and executive officers
of Southern Jersey as a group beneficially owned 400,618 shares of Southern
Jersey common stock, representing 35.5% 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 cannot be
voted at the meeting. The directors and executive officers of Southern Jersey
and Farmers and Merchants National Bank have indicated their intention to vote
all the shares they beneficially own FOR the merger agreement.
The matters to be considered at the meeting are of great importance to
the shareholders of Southern Jersey. Accordingly, we urge you to read and
carefully consider the information presented in this proxy statement-prospectus,
and to complete, date, sign and promptly return the enclosed proxy in the
enclosed postage paid envelope.
Voting Rights; Proxies
If you properly execute a proxy card and send it to Southern Jersey 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 Southern Jersey 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 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 meeting will not automatically revoke
your proxy. To revoke a proxy, you must either file a written notice of
revocation with the Southern Jersey Corporate Secretary, or deliver a properly
executed proxy with a later date to the Southern Jersey Assistant Corporate
Secretary. The Southern Jersey Assistant Corporate Secretary will be in
attendance at the meeting and, prior thereto, can be reached at the following
address:
Paul J. Ritter, III
Assistant Corporate Secretary
Southern Jersey Bancorp of Delaware, Inc.
53 South Laurel Street
Bridgeton, New Jersey 08302
The election inspectors appointed for the meeting, who will determine
whether or not a quorum is present, will tabulate votes cast by proxy or in
person at the meeting. Abstentions and "broker non-votes" will be treated as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. Abstentions occur when proxies are marked as abstentions,
or when shareholders who have not filed proxies appear in person but abstain
from voting. "Broker non-votes" occur when 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 Southern Jersey may solicit proxies for the meeting from shareholders in
person or by telephone. These directors, officers and employees will not be
specifically compensated for their services. Southern Jersey 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. Southern Jersey will bear all costs of soliciting
proxies for the meeting.
Quorum
The presence, in person or by proxy, of at least a majority of the
Southern Jersey common stock issued and outstanding and entitled to be voted at
the meeting is necessary to constitute a quorum.
THE PROPOSED MERGER
A copy of the merger agreement is attached as Appendix A to this proxy
statement-prospectus and is incorporated by reference herein. Descriptions of
the merger and the merger agreement are qualified in their entirety by reference
to the merger agreement.
General Description
The merger agreement provides for the merger of Southern Jersey with
and into Hudson United, with Hudson United as the surviving entity. The merger
agreement 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,
including receipt of regulatory approvals and the expiration of regulatory
waiting periods, have been met. The merger agreement provides that Hudson United
will set the exact closing date in a notice delivered to Southern Jersey. The
merger agreement also provides that Hudson United and Southern Jersey may agree
on a different closing date. The parties currently anticipate closing in the
fourth quarter of 1999. The merger will become effective at the time specified
in a certificate of merger which Hudson United and Southern Jersey will prepare
and which Hudson United will file with the New Jersey Department of Treasury,
Division of Commercial Recording and the Delaware Secretary of State following
the closing. Hudson United and Southern Jersey 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 Farmers and Merchants National
Bank with Hudson United Bank, with Hudson United Bank as the surviving entity.
The exact closing date and effective time are dependent upon satisfaction of
numerous conditions, some of which are not under Hudson United's or Southern
Jersey's control.
Consideration; Exchange Ratio; Cash Instead of Fractional Shares
When the merger becomes effective, except as noted below, each
outstanding share of Southern Jersey common stock will be converted into the
right to receive 1.26 shares of Hudson United common stock. The 1.26 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 effective time of the merger.
The exchange ratio is also subject to adjustment as described under "Special
Termination Provisions" on pages 42-44. Certain shares of Southern Jersey common
stock held by Southern Jersey 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, Southern
Jersey shareholders will receive, without interest, a cash payment equal to the
fractional share interest to which they would otherwise be entitled multiplied
by the median pre-closing price of Hudson United common stock. The median
pre-closing price of Hudson United common stock will be calculated by taking the
price half-way between the closing prices left after discarding the four lowest
and four highest closing prices in the ten consecutive trading day period which
ends on, and includes, the fifth business day before the scheduled closing date.
All shares of Hudson United common stock to be issued to a Southern Jersey
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 price
o when the merger agreement was signed,
o when this proxy statement was mailed,
o when the Southern Jersey shareholders meet to vote on the merger
or
o when Southern Jersey 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 Southern Jersey common stock.
Conversion of Southern Jersey Options to Hudson United Common Stock
Options to acquire Southern Jersey common stock have been issued
pursuant to the Southern Jersey Bancorp of Delaware, Inc. Stock Option and Stock
Appreciation Plans. The merger agreement provides that each of these options
which is outstanding when the merger becomes effective will be converted into
Hudson United common stock. At the effective time of the merger, holders of
options to purchase Southern Jersey common stock will receive the value of their
options in Hudson United common stock without the need to exercise their
options. For each outstanding option held at the effective time of the merger,
Southern Jersey option holders will receive the number of Hudson United shares
which is determined through the following formula: (i) the number of Southern
Jersey shares covered by the option are multiplied by the exchange ratio of
1.26, and that product is then multiplied by the median pre-closing price of a
share of Hudson United's common stock, (ii) the exercise price of the Southern
Jersey option multiplied by the number of Southern Jersey shares covered by the
option is then subtracted from the resulting product, and (iii) the net amount
is then divided by the median pre-closing price of a share of Hudson United's
common stock. Hudson United will pay cash in lieu of issuing fractional shares
of its common stock, and each Southern Jersey option holder who would otherwise
be entitled to a fractional interest will receive an amount in cash that is
determined by multiplying their fractional interest by the median pre-closing
price.
As of August 10, 1999, there were options outstanding for 75,480 shares
of Southern Jersey common stock which would be converted in the merger as
described above.
While the merger will be a tax-free exchange for holders of Southern
Jersey common stock, the conversion of the options to Hudson United common stock
will be a taxable event for the option holders. For tax purposes each option
holder will recognize income, taxable at ordinary income rates, on the value of
the Hudson United common stock received.
<PAGE>
Background of and Reasons for the Merger
Background of the Merger
As a result of the large marine and commercial loan losses suffered by
Southern Jersey in 1998 and the first half of 1999, and the concomitant need to
raise additional equity capital, the Southern Jersey Board discussed and
evaluated alternatives intended to enhance shareholder value, including the
potential sale of the company. Based upon increased competition, declining net
interest spreads, risks associated with the loan portfolio, lack of asset
generation capability, and equity market volatility, the Southern Jersey Board
determined that the most effective means of increasing shareholder value was the
sale of Southern Jersey. The Board decided to contact potential merger partners
on a select and confidential basis, in order to make the process manageable and
to minimize its impact on its day-to-day operations. The Board authorized First
Capital Group LLC, its financial advisor, to compile a confidential information
packet with respect to Southern Jersey and to approach potential interested
parties.
First Capital provided Southern Jersey with a comprehensive list of
potentially interested parties. Southern Jersey reviewed and narrowed the list.
A total of 12 institutions were approached to ascertain their interest. These
institutions varied in size and structure and included regional and community
banking institutions. Interested parties were given confidentiality agreements
and informational packets regarding Southern Jersey, including its historical
financial performance and a description of its market area. Southern Jersey
encouraged interested parties to submit indications of interest as promptly as
possible. Three parties expressed an interest in Southern Jersey and were
permitted to conduct some preliminary due diligence to refine their level of
interest and to enable them to formulate an offer. First Capital reviewed the
expressions of interest and ranked them according to the benefits offered to the
shareholders. When ranking the expressions of interest, First Capital considered
among other things the ability of the interested party to complete the merger
without contingencies, the consideration offered, the tax consequences, the
liquidity of any non-cash consideration and the underlying value of any non-cash
consideration, and the future prospects of the potential acquirer. At a Board
meeting on May 27, 1999, First Capital reviewed with the Southern Jersey Board
the expressions of interest it had received to that date.
Southern Jersey provided the prospective buyers with the opportunity to
present a final indication of interest and to clarify their indication of
interest on specific issues to provide a common basis for comparison. Based on
final indications of interest as of June 21, 1999, First Capital prepared an
analysis on each one individually and compared them in terms of conditions and
shareholder value. After reviewing First Capital's analysis, the Board
determined that Hudson United's final indication of interest was superior to the
others. The Board authorized First Capital and the Chairman of the Board and
Chief Executive Officer and the President of Southern Jersey to continue
negotiations with Hudson United and authorized Block & Balestri, P.C., Dallas,
Texas, Southern Jersey's counsel, to negotiate a definitive agreement with
Hudson United.
On Friday June 25, 1999, First Capital and Southern Jersey's duly
authorized representatives met with Hudson United to further negotiate and
refine Hudson United's expression of interest. As a result of their
negotiations, Southern Jersey's Chairman instructed Southern Jersey's counsel to
begin negotiating a definitive agreement with Hudson United's counsel, following
receipt of a draft agreement. On June 25, 1999, Southern Jersey's counsel
received from Hudson United's counsel a draft definitive agreement representing
Hudson United's offer. Negotiations regarding the terms of the Hudson United
transaction proceeded over the next few days.
On June 28, 1999, the Southern Jersey Board met with its legal counsel
and First Capital to discuss the terms of the definitive agreement. First
Capital provided the Board with an oral opinion that the merger terms were fair
to the shareholders of Southern Jersey from a financial perspective and that the
merger with Hudson United constituted the best indication of interest available
from the financial perspective of the Southern Jersey shareholders. The Southern
Jersey Board approved the definitive agreement, which was completed and signed
on June 28, 1999.
Southern Jersey's Reasons for the Merger
In reaching its determination that the merger is fair to, and in the
best interests of, Southern Jersey and its shareholders, the Southern Jersey
Board considered a number of factors, including the following:
o the current condition and growth prospects of Southern Jersey and
The Farmers and Merchants National Bank, their historical results
of operations and their prospective results of operations were
Southern Jersey and Farmers and Merchants to remain independent;
o the economic, business and competitive climate for banking and
financial institutions in the southern part of New Jersey, with
special consideration given to recent transactions that have
increased the competitive environment in the financial services
and banking industry;
o the consideration offered to Southern Jersey shareholders by
Hudson United in absolute terms as compared to the value of other
offers received from qualified and informed potential acquirers;
and as compared to recent mergers and acquisitions involving other
banking and financial institutions in New Jersey and nationally;
o the potential market value, liquidity and dividend yield of
Southern Jersey common stock if Southern Jersey were to remain
independent;
o Southern Jersey's necessity to raise additional equity capital if
it was to remain independent;
o the historically greater liquidity represented by the Hudson
United common stock to be received in the merger;
o the greater financial and management resources and customer
product offering of Hudson United which could increase the
competitiveness of the combined institution in Southern Jersey's
market area and the ability to serve the depositors, customers and
communities currently served by Southern Jersey;
o the historical results of operation and financial condition of
Hudson United and the future prospects for Hudson United,
including anticipated benefits of the merger;
o the future growth prospects of Hudson United following the merger;
o the fact that the merger will be a tax-free exchange to Southern
Jersey shareholders for federal income tax purposes to the extent
they receive Hudson United common stock as consideration in
exchange for their shares of Southern Jersey common stock;
o the number of acquisitions completed by Hudson United in recent
years; and
o the presentation of First Capital and the fact that First Capital
would render an opinion that the consideration to be received in
the merger by Southern Jersey shareholders was fair to such
holders from a financial point of view.
This list of factors is not intended to be an exhaustive list, but is
intended to include the material factors considered by the Southern Jersey
Board. In reaching its determination to approve and recommend the merger, the
Southern Jersey Board did not assign any relative or specific weights to the
these factors, and the individual directors may have given differing weights to
different factors.
Recommendations of the Southern Jersey Board of Directors
The Southern Jersey Board believes that the merger is fair to, and in
the best interests of, Southern Jersey and its shareholders. Accordingly, the
Board unanimously approved the merger agreement and recommends that Southern
Jersey shareholders vote FOR the approval of the merger agreement and merger.
Hudson United's Reasons for the Merger
Hudson United entered into the merger agreement with Southern Jersey 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 Southern Jersey are consistent with this strategy. Hudson
United anticipates that combining the New Jersey operations of Southern Jersey
and Hudson United will enhance Hudson United's ability to promote operational
efficiencies and services to the combined institutions' customers.
Interests of Certain Persons in the Merger
In considering the recommendation of the Southern Jersey Board
regarding the merger, Southern Jersey shareholders should know that certain
directors and officers of Southern Jersey have interests in the merger in
addition to their interests as shareholders of Southern Jersey. All those
additional interests are described below, to the extent they are material and
are known to Southern Jersey. The Southern Jersey Board was aware of these
interests and considered them, among other matters, in approving the merger
agreement:
Employment and Change in Control Agreements.
Employment and Non-Competition Agreements When the merger becomes
effective, Clarence D. McCormick, the Chairman and CEO of Southern Jersey, and
Clarence D. McCormick, Jr., the President of Southern Jersey, will be employed
by Hudson United from the closing date of the merger to December 31, 1999.
Clarence D. McCormick and Clarence D. McCormick, Jr. have also agreed to enter
into agreements at the closing which will prohibit each of them from working for
a competitor of Hudson United, in certain counties in New Jersey, for a period
of three years from January 1, 2000 to December 31, 2002. In consideration of
the execution of these agreements, Hudson United will pay each their respective
annual salary in effect immediately prior to the closing during the three-year
non-compete period. Hudson United has agreed, after the merger becomes
effective, to assign to both Clarence D. McCormick and Clarence D. McCormick,
Jr., certain insurance policies on each of their respective lives upon payment
by each of the McCormicks to Hudson United of an amount equal to the "split
dollar" obligation owed with respect to the policies. The monetary benefit to
the McCormicks from these assignments is $14,358 for Clarence D. McCormick and
$1,172 for Clarence D. McCormick, Jr. Hudson United has also agreed that after
the merger it will assign to Clarence D. McCormick, Jr. a vehicle, which he
currently operates. The vehicle has a value of $38,000. Hudson United will also
assume lease payments with respect to a vehicle operated by Clarence D.
McCormick. The aggregate value of such lease payments is $56,639. Also, James
Mack, the CEO of Farmers and Merchants National Bank will receive a lump sum
severance payment of $265,000 after the merger.
Stock Benefits. When the merger becomes effective, each outstanding
Southern Jersey option will be converted directly into Hudson United common
stock. All outstanding non-vested options will vest as a result of the merger.
See page 28.
Indemnification; Directors and Officers. The merger agreement requires
Hudson United to indemnify each director and officer of Southern Jersey and
Farmers and Merchants National Bank to the fullest extent permitted under
applicable law and its certificate of incorporation and by-laws, for a period of
six years after the merger is completed. The merger agreement also requires
Hudson United to provide Southern Jersey and its subsidiary bank's 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 Southern Jersey's and its subsidiary bank's existing directors' and
officers' insurance policies.
Share Ownership. As of the July 31, 1999 record date for the meeting,
the directors of Southern Jersey and Farmers and Merchants National Bank
beneficially owned in the aggregate approximately 34.1% of the issued and
outstanding shares of Southern Jersey common stock. The directors of Southern
Jersey and its bank subsidiary have indicated their intention to vote in favor
of the merger agreement. As of August 10, 1999, executive officers of Southern
Jersey who are not also directors beneficially owned, in the aggregate, 1.4% of
the issued and outstanding shares of Southern Jersey common stock. A director of
Hudson United, Thomas R. Farley, owns approximately 7,700 shares, or 59%, of
Southern Jersey common stock.
Opinion of Southern Jersey's Financial Advisor
General
Southern Jersey hired First Capital Group, LLC to serve as its
financial advisor in connection with the merger and related matters based on
First Capital's qualifications, expertise and reputation. On July 8, 1999, First
Capital delivered its written opinion to the Southern Jersey board of directors
that the consideration that Southern Jersey will receive from Hudson United is
fair, from a financial point of view, to Southern Jersey shareholders. That
opinion has been updated as of the date of this proxy statement-prospectus. The
full text of First Capital's updated opinion, which includes the assumptions
made by First Capital, the procedures followed by First Capital, the matters
considered by First Capital, and the limitations on the review undertaken by
First Capital, is attached as Appendix C to this proxy statement-prospectus. You
should read this opinion carefully and in full. First Capital's opinion is not a
recommendation to you as to how you should vote at the Southern Jersey
shareholder meeting.
In providing its opinion, First Capital, among other things:
o analyzed certain internal financial statements and other financial
and operating data concerning Southern Jersey prepared by Southern
Jersey's management;
o analyzed certain publicly available audited and unaudited
financial statements and other information about Southern Jersey
and Hudson United, including information included in Southern
Jersey's annual reports for the three years ended December 31,
1998, in Hudson United's annual reports for the three years ended
December 31, 1998, in Hudson United's quarterly reports for the
periods ended March 31, 1999, September 30, 1998 and June 30,
1998, and in Southern Jersey's financial statements for the
quarters ended March 31, 1999, September 30, 1998 and June 30,
1998;
o analyzed certain financial projections of Southern Jersey prepared
by Southern Jersey's management;
o discussed Southern Jersey's past and current operations and
financial condition with its senior executives;
o reviewed the reported stock prices and trading activity for Hudson
United common stock;
o compared the financial performance of Hudson United common stock
and trading activity with that of certain other comparable
publicly-traded companies and their securities;
o reviewed and compared certain security analysts' reports of Hudson
United's common stock prepared by various investment banking
firms;
o reviewed the financial terms, to the extent publicly available, of
certain comparable past transactions;
o reviewed the merger agreement; and
o performed other analyses that First Capital believed were
appropriate.
In connection with its review, First Capital relied on, and assumed the
accuracy and completeness of, all of the information that was provided to it by
Southern Jersey or by others or that was made publicly available, and did not
independently verify this information. First Capital has assumed that the
financial projections have been reasonably prepared on the basis reflecting the
best currently available estimates and judgments of Southern Jersey's future
financial performance. First Capital has not made any independent valuation or
appraisal of Southern Jersey's assets or liabilities. First Capital has not been
given any appraisals, and has not examined any of Southern Jersey's individual
loan files.
First Capital relied solely on Hudson United's publicly available data
and did not discuss Hudson United's financial condition, performance, and
prospects with Hudson United's management. First Capital did not independently
evaluate or appraise Hudson United's assets, liabilities or business prospects,
it was not furnished with any evaluations or appraisals, and it did not review
any individual credit files. First Capital is not an expert in evaluating loan
portfolios to assess the adequacy of the allowance for losses with respect to
such loan portfolios, and First Capital has assumed that the allowances for each
of the companies are adequate to cover such losses. First Capital's opinion is
based on economic, market and other conditions in effect on the date of its
opinion and on information which was made available to it as of the date of its
opinion.
In connection with rendering its opinion, First Capital performed a
variety of financial analyses. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances. Therefore, a fairness opinion is not readily susceptible to
partial analysis or summary description. Furthermore, the evaluation of the
fairness, from a financial point of view, of the exchange ratio to the holders
of Southern Jersey common stock was, to some extent, a subjective one based on
the experience and judgment of First Capital and not merely the result of
mathematical analysis of financial data. Accordingly, you should consider First
Capital's analyses as a whole and should not select portions of its analyses or
factors considered by it without also considering all of its analyses and
factors, because doing so could create an incomplete view of the evaluation
process upon which First Capital based its opinion. You should not take the
ranges of valuations which result from any particular analysis that is described
below to be First Capital's view of Southern Jersey's actual value. In
performing its analyses, First Capital made many assumptions about industry
performance, business and economic conditions and other matters, many of which
are beyond Southern Jersey's control. The analyses performed by First Capital do
not necessarily indicate actual values or future results, which may be
significantly more or less favorable than those that are suggested by the
analyses. These analyses are not appraisals and do not necessarily reflect the
prices at which a company might actually be sold. In addition, you should not
consider First Capital's analyses to be the same as that of the Southern Jersey
Board or Southern Jersey's management with respect to Southern Jersey's value.
The following is a summary of the analyses performed by First Capital
in connection with its opinion:
Analysis of Selected Transactions
First Capital performed an analysis of premiums paid in selected
pending or recently completed acquisitions of banking organizations in Delaware,
New Jersey, New York and Pennsylvania which are similar to the merger. These
transactions are ones in where the seller possessed similar asset size, regional
location and form of consideration. The comparable transactions consisted of 25
mergers and acquisitions of banking organizations in Delaware, New Jersey, New
York and Pennsylvania from January 1, 1998 to June 28, 1999, with the total
assets of the sellers ranging from $200 million to $1 billion. Based on the
closing stock price of Hudson United common stock on June 28, 1999, and Southern
Jersey's financial data as of March 31, 1998, the analysis yielded ratios of the
transactions' purchase price as follows:
<TABLE>
<CAPTION>
For this
Ratio transaction For comparable transactions
----- ----------- ---------------------------
Low High Average Median
--- ---- ------- ------
<S> <C> <C> <C> <C> <C>
Equity to 3/31/99 book value 1.64x 1.12x 3.75x 2.42x 2.25x
Tangible equity to 3/31/99
tangible book value 1.64x 1.15x 3.75x 2.48x 2.41x
Trailing last 12 months earnings to
annualized 3/31/99 income 49.52x 9.61x 45.22x 27.49x 28.22x
Seller's equity to assets 6.66% -- -- 10.73% 9.08%
</TABLE>
Discounted Cash Flow Analysis
Using discounted cash flow analysis, First Capital estimated the
present value of the future stream of after-tax cash flow that Southern Jersey
could produce through the year 2003, under various circumstances, assuming that
Southern Jersey performed in accordance with its management's earnings/return
projections. First Capital used two separate terminal values for Southern Jersey
at the end of the period by applying multiples of earnings ranging from 20 times
to 22 times and multiples of book value ranging from 2.0 times to 3.0 times.
First Capital then discounted the cash flow streams, dividends paid to the
shareholders (assuming any earnings in excess of that required to maintain the
current regulatory mandated tangible equity to tangible asset ratio are paid out
in dividends and the raising of such equity capital through the issuance of
additional shares of Southern Jersey common stock) and terminal values using
discount rates ranging from 12.0% to 16.0% chosen to reflect different
assumptions regarding the required rates of return for Southern Jersey and the
inherent risk surrounding the underlying projections. This discounted cash flow
analysis indicated a range of $31.39 per share to $40.66 per share utilizing
multiples of earnings as residual values and $28.25 per share to $41.10 per
share utilizing multiples of book value. This compares favorably to the
consideration to be paid to Southern Jersey shareholders of: (i) $44.02 per
share of Southern Jersey common stock, based on a closing price of $34.94 per
share of Hudson United common stock on the date before the announcement of the
merger, June 28, 1999; and (ii) $41.11 per share of Southern Jersey common
stock, based on a closing price of $32.63 per share of Hudson United common
stock on July 7, 1999.
Comparable Company Analysis
First Capital compared selected balance sheet data, asset quality,
capitalization and profitability ratios and market statistics using financial
data at or for the twelve months ended March 31, 1999, and market data as of
July 7, 1999, for Hudson United to a group of selected bank holding companies
which First Capital deemed to be relevant, all of which are bank holding
companies with assets between $1 billion and $15 billion, including:
o Carolina First Corporation
o Centura Banks, Inc.
o Commercial Federal Corp.
o Community First Bankshares
o Cullen/Frost Bankers, Inc.
o First Bancorp Puerto Rico
o First Midwest Bancorp, Inc.
o FirstMerit Corporation
o Premier Bancshares, Inc.
o Provident Bankshares Corporation
o Riggs National Corporation
o Silicon Valley Bancshares
o Susquehanna Bancshares, Inc.
o Trustco Bank Corporation
o United Bankshares, Inc.
o Whitney Holding Corporation
This comparison, among other things, showed that:
o Hudson United's equity to asset ratio was 6.06%, compared to an
average of 8.13% and a median of 7.80% for the group of selected
bank holding companies;
o for the twelve-month period ended March 31, 1999, Hudson United's
return on average assets was 1.50%, compared to an average of
1.11% and a median of 1.12% for the group of selected bank holding
companies;
o for the twelve-month period ended March 31, 1999, Hudson United's
return on average equity was 22.78%, compared to an average of
13.25% and a median of 14.15% for the group of selected bank
holding companies;
o at March 31, 1999, Hudson United's non performing loans to gross
loans ratio was 1.20%, compared to an average of 1.03% and a
median of 0.86% for the group of selected bank holding companies;
o at June 28, 1999, Hudson United's price per share to book value
per share at March 31, 1999, was 3.31 times, compared to an
average of 2.45 times and median of 2.61 times for the group of
selected bank holding companies;
o at June 28, 1999, Hudson United's price per share to earnings per
share at March 31, 1999, was 14.09 times, compared to an average
of 20.83 times and median of 18.79 times for the group of selected
bank holding companies; and
o at June 28, 1999 Hudson United's dividend yield was 2.86%,
compared to an average of 2.00% and a median of 2.00% for the
group of selected bank holding companies.
First Capital also compared selected stock market results of Hudson
United to the publicly available corresponding data of other composites which
First Capital deemed to be relevant, including Philadelphia KBW Bank Index,
NASDAQ Bank Index of publicly traded banks and the S&P 500. Results from
indexing the S&P 500, Philadelphia KBW Bank Index , the NASDAQ Bank Index of
publicly traded banks, and Hudson United's stock from January 1, 1999, to July
7, 1999, revealed favorable trends for Hudson United's common stock performance
to that of the other bank indices. No company or transaction used in the
comparable company and comparable transaction analyses is identical to Southern
Jersey or the merger. Accordingly, First Capital's analysis of the results of
these comparisons involves complex considerations and judgments concerning
differences in financial and operating characteristics of Southern Jersey and
other factors that could affect the public trading value of the companies to
which they are being compared. Mathematical analysis (such as determining the
average or median) is not in itself a meaningful method of using comparable
transaction data or comparable company data.
The summary set forth above does not purport to be a complete
description of the analyses and procedures performed by First Capital in the
course of arriving at its opinion.
In payment for its services as the financial advisor to Southern
Jersey, First Capital is to be paid a fee equal to one percent of the
consideration paid to Southern Jersey as consideration for the merger.
The full text of the updated opinion of First Capital dated the date of
this proxy statement-prospectus, which sets forth assumptions made and matters
considered, is attached hereto as Appendix C to this proxy statement-prospectus.
Southern Jersey shareholders are urged to read this opinion in its entirety.
First Capital's opinion is directed only to the consideration to be received by
Southern Jersey shareholders in the merger and does not constitute a
recommendation to any Southern Jersey shareholder as to how such shareholder
should vote at the shareholders meeting.
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 Southern Jersey, who
may be deemed to be "affiliates" of Southern Jersey pursuant to 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 to be "affiliates" of Southern Jersey 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
Southern Jersey common stock owned by them and any Hudson United common stock
they acquire 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 Southern
Jersey. Those persons have also agreed not to transfer their Southern Jersey
common stock 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 issued to
those persons pursuant to the merger will bear a legend stating that the shares
are restricted in accordance with the letter signed by the person and may not be
transferred except in compliance with those 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 accounting restrictions.
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 Southern
Jersey;
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, or that has significant potential to
be resolved in a way that would deprive the terminating party of
the material benefits 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 Southern Jersey wish to consummate
it anyway, Southern Jersey 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 material respects, of the
representations and warranties of Southern Jersey contained in the
merger agreement;
o performance by Southern Jersey, in all material respects, of its
obligations under the merger agreement; and
o Execution by Clarence McCormick and Clarence McCormick, Jr. of
non-competition agreements, in accordance with the merger
agreement.
The obligation of Southern Jersey to consummate the merger is also
conditioned on, among other things:
o continued accuracy, in all material respects, of the
representations and warranties of Hudson United contained in the
merger agreement;
o performance by Hudson United, in all material respects, of its
obligations under the merger agreement; and
o receipt by Southern Jersey of the updated fairness opinion letter
of First Capital, which is attached as Appendix C to this proxy
statement-prospectus.
Conduct of Business Pending the Merger
The merger agreement requires Southern Jersey to conduct its business
until the merger takes place only in the ordinary course of business and
consistent with past banking practices, except as permitted under the merger
agreement or with the written consent of Hudson United. Under the merger
agreement, Southern Jersey 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 certificate of incorporation, by-laws
or similar governing documents;
o grant anyone severance or termination pay, or enter into or amend
any employment agreement;
o issue new stock, grant an option, set aside or pay any dividend;
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 capital expenditure in excess of $100,000 in the
aggregate (other than certain agreed upon expenditures);
o make or commit to make any new loan in excess of $100,000, renew
for a period greater than one year any existing loan or extension
of credit in an amount of $100,000 or more, or increase by
$100,000 or more the aggregate credit outstanding of any borrower;
o make any material change in its accounting methods or practices
not required by generally accepted accounting principles, also
known as "GAAP"; and
o take any action that would cause any of its representations or
warranties in the merger agreement to be materially untrue or
incorrect when the merger takes effect.
Under the merger agreement, Southern Jersey 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, Southern Jersey may enter into discussions or
negotiations or provide any information in connection with an unsolicited
possible transaction of this sort if the Southern Jersey Board, after consulting
with counsel, determines in the exercise of its fiduciary responsibilities that
it should take those actions. Southern Jersey has agreed to promptly communicate
to Hudson United the terms of any proposal it may receive with respect to any
acquisition transaction. This restriction, along with the option described in
the following section, may deter other potential acquirors of control of
Southern Jersey.
Stock Option to Hudson United for Southern Jersey Shares
As a condition to Hudson United entering into the merger agreement,
Hudson United required that Southern Jersey grant Hudson United an option that
was designed to deter other companies from attempting to acquire control of
Southern Jersey. The option gives Hudson United the right to purchase for $24.00
per share up to 200,000 shares of Southern Jersey common stock, representing
approximately 17.7% of the outstanding Southern Jersey shares when 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.
Also as part of the stock option, Southern Jersey required that Hudson
United grant to Southern Jersey the right to require Hudson United to purchase
200,000 Southern Jersey shares for $24.00 per share. Southern Jersey's "put"
option is exercisable in whole or in part for a period of six months upon
termination of the merger agreement by either Hudson United or Southern Jersey
for any reason.
Hudson United could recognize a gain if it purchases the shares subject
to the options and resells the shares for more than the exercise price. The
existence of the option may deter other potential acquirors of control of
Southern Jersey, because it would probably increase the cost of acquiring all
the shares of Southern Jersey common stock. Hudson United's exercise of its
option could also make pooling-of-interests accounting treatment unavailable to
a subsequent acquiror. The agreement granting the option and the "put" appears
as Appendix B to this document.
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
Consummation of the Hudson United-Southern Jersey merger and the merger
of The Farmers and Merchants National Bank of Bridgeton into Hudson United Bank
requires approvals from the FDIC and the New Jersey Department of Banking and
Insurance. 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 Southern Jersey 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 on July 13,
1999. Hudson United has 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 also
necessary before the merger can be completed. While Hudson United and Southern
Jersey 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 Southern Jersey.
Management and Operations After the Merger
As a result of the merger, Southern Jersey will be merged with and into
Hudson United, with Hudson United as the surviving entity. Immediately following
the merger, The Farmers and Merchants National Bank of Bridgeton will 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. The current directors of Southern Jersey will be invited to be
advisory directors for a division of Hudson United Bank but will not sit on
Hudson United's Board.
Exchange of Certificates
When the merger takes effect, no one will any longer have any rights as
a Southern Jersey shareholder. Certificates that represented shares of Southern
Jersey common stock automatically will represent the shares of Hudson United
common stock and cash, if any, into which the merger converts those shares of
Southern Jersey common stock.
Promptly after the merger takes effect, Hudson United's exchange agent
will send written instructions and a letter of transmittal to each Southern
Jersey stockholder, indicating how to exchange Southern Jersey stock
certificates for the Hudson United stock certificates. Southern Jersey
stockholders 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
Southern Jersey common stock will be deemed to have been issued at the time the
merger becomes effective. Thus, Southern Jersey 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 Southern Jersey common stock have been surrendered. At
that time any accrued dividends and other distributions on those shares of
Hudson United common stock will be paid without interest.
Southern Jersey shareholders, promptly after they surrender their
Southern Jersey 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 Southern Jersey common stock have been converted. At
the time the new stock certificate is issued, a check for the amount of the
fractional share interest, if any, will also be issued to the former Southern
Jersey shareholder.
Amendments
Hudson United and Southern Jersey may amend the merger agreement by
mutual written consent at any time before the merger is completed. However, the
merger agreement provides that certain types of amendments, such as an amendment
to decrease the exchange ratio, cannot be made following adoption of the merger
agreement by the Southern Jersey shareholders without their approval.
Termination
Hudson United and Southern Jersey may terminate the merger agreement by
mutual written consent at any time.
Either Hudson United or Southern Jersey may terminate the merger
agreement for certain reasons, including the following:
o the merger has not been completed by April 30, 2000,
o Southern Jersey shareholders fail to approve the merger agreement
at the meeting, 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 Southern Jersey's
business, operations, assets or financial condition, or
o Southern Jersey materially breaches the merger agreement.
Southern Jersey 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 affects of any pending acquisition by
Hudson United);
o Southern Jersey's Board has approved an acquisition of Southern
Jersey by another entity after determining, upon advice of
counsel, that such approval is necessary in the exercise of its
fiduciary obligations (which would cause a triggering event under
the stock option granted to Hudson United); or
o Hudson United materially breaches the merger agreement.
If the merger agreement is terminated, each party will bear its own
expenses and will retain all rights and remedies it may have at law or equity
under the merger agreement.
Special Termination Provisions
The merger agreement also contains provisions designed to let the
Southern Jersey's 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.
These particular termination provisions are also designed to let Hudson
United override the termination by increasing the exchange ratio to a level that
would give Southern Jersey 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 Southern Jersey shareholders vote at the Southern Jersey meeting. We
cannot assure you either that the Southern Jersey 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
Southern Jersey.
The Southern Jersey 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 Southern Jersey 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 Southern Jersey will give
the Southern Jersey 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 Southern Jersey shareholders regardless of whether the
exchange ratio is increased.
The working 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 Southern Jersey.
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, Southern Jersey 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 principles, as of the time the
merger becomes effective, the assets and liabilities of Southern Jersey would be
added to those of Hudson United at their recorded book values and the
stockholders' equity accounts of Hudson United and Southern Jersey would be
combined on Hudson United's consolidated balance sheet. Under the pooling of
interests method of accounting, Hudson United's consolidated financial
statements will be retroactively adjusted after the merger to combine the
statements of condition and results of operations for periods prior to the
consummation of the merger. The pro forma financial information contained in
this proxy statement has been prepared using the pooling-of-interests accounting
basis to account for the merger. See "Pro Forma Financial Information" beginning
on page 46.
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 certain federal income tax
consequences of the merger. The discussion may not apply to special situations,
such as those of any Southern Jersey shareholders
o that hold Southern Jersey 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 proxy
statement is a part, Pitney, Hardin, Kipp & Szuch, counsel to Hudson United,
have advised Hudson United and Southern Jersey in an opinion dated the date of
this proxy statement 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 Southern Jersey will not recognize any gain or loss.
o Southern Jersey shareholders will not recognize any gain or loss
for federal income tax purposes upon the exchange in the merger of
shares of Southern Jersey 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
Southern Jersey stockholders will be the same as the basis of the
shares of Southern Jersey common stock surrendered in exchange
therefor.
o The holding period of Hudson United common stock will include the
holding period during which the shares of Southern Jersey common
stock surrendered in exchange were held by the Southern Jersey
shareholder, provided those shares of Southern Jersey common stock
were held as capital assets.
o Cash received by a holder of Southern Jersey 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 Southern
Jersey 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 Southern Jersey 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 Southern Jersey wish to consummate it anyway, Southern Jersey
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 Southern Jersey and Hudson United.
Certain tax consequences of the merger may vary depending upon the
particular circumstances of each holder of Southern Jersey common stock, and
other factors. Therefore, you are urged to consult your own tax advisor to
determine the particular tax consequences to you 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 Delaware law, Southern Jersey
shareholders do not 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 Southern Jersey 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 ending 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 Southern Jersey 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 information. 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
Southern Jersey incorporated herein by reference. The unaudited pro forma
financial information should be read in conjunction with such historical
financial statements and notes. The pro forma combined information does not
include the effect of the pending merger of Hudson United with Jeff Banks or the
pending acquisition of loans and deposits from Advest Bank or the recently
completed acquisition of Little Falls Bancorp. The pro forma financial
information does not give effect to anticipated cost savings net of expected
merger related expenses and restructuring charges. The historical amounts
presented in future financial statements of Hudson United for periods reported
in this proxy statement 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 JeffBanks, when consummated, as pooling of interests. See
"Certain Information about Hudson United - Recent Developments" on page 20-22.
The pro forma financial data are 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 such data are presented
and should not be construed as being representative of future periods.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Balance Sheet As of March 31, 1999 ($ in
thousands, except per share data)
Hudson
United Southern Pro forma Pro forma
Assets Bancorp Jersey Adjustments Combined
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 242,368 $ 18,008 $ -- $ 260,376
Federal funds sold 8,819 75,350 -- 84,169
Securities 3,064,880 106,140 -- 3,171,020
Assets held for sale -- -- -- --
Loans 3,424,314 240,782 -- 3,665,096
Less: Allowance for loan losses (54,504) (9,327) -- (63,831)
-------------- -------------- -------------- -------------
Total Loans 3,369,810 231,455 -- 3,601,265
-------------- -------------- -------------- -------------
Other assets 275,253 34,493 -- 309,746
Intangibles, net of amortization 84,937 -- -- 84,937
============== ============== ============== =============
Total Assets $ 7,046,067 $ 465,446 $ -- $ 7,511,513
============== ============== ============== =============
Liabilities and Stockholders' Equity
Deposits:
Noninterest bearing $ 870,506 $ 60,551 $ -- $ 931,057
Interest bearing 4,061,461 368,878 -- 4,430,339
-------------- -------------- -------------- -------------
Total deposits 4,931,967 429,429 5,361,396
-------------- -------------- -------------- -------------
Borrowings 1,292,644 -- -- 1,292,644
Other liabilities 194,287 5,032 -- 199,319
-------------- -------------- -------------- -------------
Total Liabilities 6,418,898 434,461 -- 6,853,359
Subordinated debt 100,000 -- -- 100,000
Capital Trust Securities 100,000 -- -- 100,000
Stockholders' Equity:
Preferred stock -- -- -- --
Common stock 72,246 2,184 395 74,825
Additional paid in capital 262,855 3,259 (4,234) 261,880
Retained earnings 128,030 29,805 -- 157,835
Treasury Stock (34,484) (3,839) 3,839 (34,484
Employee stock awards & ESOP shares (2,243) -- -- (2,243)
Accumulated other comprehensive income 765 (424) -- 341
-------------- -------------- -------------- -------------
Total Stockholders' Equity 427,169 30,985 -- 458,154
-------------- -------------- -------------- -------------
Total Liabilities and Stockholders' Equity $ 7,046,067 $ 465,446 $ -- $ 7,511,513
============== ============== ============== =============
Common shares outstanding (in thousands) 39,574 1,127 -- 41,024
Book value per common share $ 10.79 $ 27.48 $ -- $ 11.17
</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 Southern Pro forma
Bancorp Jersey Combined
-------------- -------------- -------------
<S> <C> <C> <C>
Interest on loans $ 68,862 $ 4,857 $ 73,719
Interest on securities 41,956 1,514 43,470
Other interest income 324 967 1,291
Total Interest Income 111,142 7,338 118,480
-------------- -------------- -------------
Interest on deposits 31,984 4,191 36,175
Interest on borrowings 16,611 -- 16,611
-------------- -------------- -------------
Total Interest Expense 48,595 4,191 52,786
-------------- -------------- -------------
Net Interest Income before
Provision for loan loss 62,547 3,147 65,694
Provision for loan loss 2,500 566 3,066
-------------- -------------- -------------
Net Interest Income after
Provision for loan loss 60,047 2,581 62,628
Noninterest income 17,479 1,426 18,905
Noninterest expense 39,679 3,652 43,331
-------------- -------------- -------------
Income before income taxes 37,847 355 38,202
Income tax provision 13,246 99 13,345
-------------- -------------- -------------
Net income $ 24,601 $ 256 $ 24,857
============== ============== =============
Earnings per share:
Basic $ 0.62 $ 0.23 $ 0.60
Diluted $ 0.61 $ 0.23 $ 0.59
Weighted Average Common Shares:
(in thousands)
Basic 39,983 1,127 41,403
Diluted 40,596 1,127 42,016
</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 Southern Pro forma
Bancorp Jersey Combined
-------------- -------------- -------------
<S> <C> <C> <C>
Interest on loans $ 298,311 $ 24,624 $ 322,935
Interest on securities 162,783 5,983 168,766
Other interest income 7,453 2,676 10,129
-------------- -------------- -------------
Total Interest Income 468,547 33,283 501,830
-------------- -------------- -------------
Interest on deposits 161,077 18,400 179,477
Interest on borrowings 53,276 -- 53,276
-------------- -------------- -------------
Total Interest Expense 214,353 18,400 232,753
-------------- -------------- -------------
Net Interest Income before
Provision for loan loss 254,194 14,883 269,077
Provision for loan loss 14,374 15,270 29,644
-------------- -------------- -------------
Net Interest Income/Loss after
Provision for loan loss 239,820 (387) 239,433
Noninterest income 33,299 3,509 36,808
Noninterest expense 232,096 15,842 247,938
-------------- -------------- -------------
Income/loss before income taxes 41,023 (12,720) 28,303
Income tax provision (benefit) 17,872 (4,888) 12,984
-------------- -------------- -------------
Net Income/Loss $ 23,151 $ (7,832) $ 15,319
============== ============== =============
Earnings/Loss per share:
Basic $ 0.57 $ (6.95) $ 0.36
Diluted $ 0.56 $ (6.95) $ 0.36
Weighted Average Common Shares:
(in thousands)
Basic 40,640 1,127 42,060
Diluted 41,696 1,127 43,116
</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 Southern Pro forma
Bancorp Jersey Combined
-------------- -------------- -------------
<S> <C> <C> <C>
Interest on loans $ 306,800 $ 25,834 $ 332,634
Interest on securities 159,620 6,123 165,743
Other interest income 4,795 1,843 6,638
-------------- -------------- -------------
Total Interest Income 471,215 33,800 505,015
-------------- -------------- -------------
Interest on deposits 175,645 17,159 192,804
Interest on borrowings 40,635 -- 40,635
-------------- -------------- -------------
Total Interest Expense 216,280 17,159 233,439
-------------- -------------- -------------
Net Interest Income before
Provision for loan loss 254,935 16,641 271,576
Provision for loan loss 12,775 7,967 20,742
-------------- -------------- -------------
Net Interest Income after
Provision for loan loss 242,160 8,674 250,834
Noninterest income 54,180 3,043 57,223
Noninterest expense 181,308 11,590 192,898
-------------- -------------- -------------
Income before income taxes 115,032 127 115,159
Income tax provision (benefit) 45,205 (710) 44,495
-------------- -------------- -------------
Net Income $ 69,827 $ 837 $ 70,664
============== ============== =============
Earnings per share:
Basic $ 1.67 $ 0.75 $ 1.64
Diluted $ 1.60 $ 0.73 $ 1.57
Weighted Average Common Shares:
(in thousands)
Basic 41,362 1,120 42,808
Diluted 43,635 1,148 45,081
</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 Southern Pro forma
Bancorp Jersey Combined
-------------- -------------- -------------
<S> <C> <C> <C>
Interest on loans $ 287,671 $ 22,441 $ 310,112
Interest on securities 150,856 6,802 157,658
Other interest income 3,987 1,147 5,134
-------------- -------------- -------------
Total Interest Income 442,514 30,390 472,904
-------------- -------------- -------------
Interest on deposits 173,521 14,870 188,391
Interest on borrowings 27,045 -- 27,045
-------------- -------------- -------------
Total Interest Expense 200,566 14,870 215,436
-------------- -------------- -------------
Net Interest Income before
Provision for loan loss 241,948 15,520 257,468
Provision for loan loss 17,140 1,805 18,945
-------------- -------------- -------------
Net Interest Income after
Provision for loan loss 224,808 13,715 238,523
Noninterest income 40,257 3,246 43,503
Noninterest expense 204,679 10,357 215,036
-------------- -------------- -------------
Income before income taxes 60,386 6,604 66,990
Income tax provision 23,490 1,276 24,766
-------------- -------------- -------------
Net Income $ 36,896 $ 5,328 $ 42,224
============== ============== =============
Earnings per share:
Basic $ 0.85 $ 4.77 $ 0.94
Diluted $ 0.82 $ 4.67 $ 0.91
Weighted Average Common Shares:
(in thousands)
Basic 42,402 1,118 43,840
Diluted 44,990 1,141 46,428
</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 1.26 shares of Hudson United common stock for each of the 1,127,481
shares of Southern Jersey common stock which were outstanding at March
31, 1999.
(3) Following consummation of the merger, it is anticipated that Hudson
United will sell substantially all of the nonperforming assets and
contain certain other identified loans of Southern Jersey aggregating
approximately $55 million and take a related charge of up to $25
million to write these assets down to their estimated realizable value
based upon an accelerated sale process.
(4) Anticipated cost savings net of expected merger-related expenses and
restructuring charges are not expected to be material and therefore the
pro forma financial information does not give effect to these items.
(5) In summary, the pro forma financial information was adjusted for the
merger by the (i) addition of 1,420,626 shares of Hudson United common
stock with a stated value of $1.778 per share amounting to $2,525,873;
(ii) elimination of 1,307,683 shares of Southern Jersey common stock
with a stated value of $1.67 per share amounting to $2,183,831; (iii)
addition of 29,777 shares of Hudson United common stock amounting to
$52,944 in exchange for Southern Jersey's stock options; (iv)
elimination of 180,202 shares of Southern Jersey common stock held in
Southern Jersey's treasury at a cost of $3,839,000.
(6) Earnings per share data has been computed based on the combined
historical net income applicable to common stockholders of Hudson
United using historical weighted average shares outstanding of Hudson
Untied common stock for the given period and the common stock to be
issued in connection with the merger.
(7) The pro forma information presented above does not reflect Hudson
United's pending acquisitions of JeffBanks and certain 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 20.
<PAGE>
DESCRIPTION OF HUDSON UNITED CAPITAL STOCK
General
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.
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 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 prior rights upon
liquidation.
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 SOUTHERN JERSEY
At the time the merger becomes effective, each Southern Jersey
shareholder will become a shareholder of Hudson United. Hudson United is a
business corporation incorporated in New Jersey under the New Jersey Business
Corporation Act and Southern Jersey is a business corporation incorporated in
Delaware under the Delaware General Corporation Law. The following is a
comparison of certain provisions of the respective certificates of incorporation
and by-laws of each of Southern Jersey and Hudson United, and a description of
certain provisions of the Business Corporation Act and the General Corporation
Law which are applicable to Hudson United and Southern Jersey. This summary is
not complete and is qualified in its entirety by reference to the Business
Corporation Act or the General Corporation Law, which may change from time to
time, and the respective certificates of incorporation and by-laws of Hudson
United and Southern Jersey, which also may be changed.
Voting Requirements
Under the 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 an amendment to the certificate of incorporation,
o the voluntary dissolution of the corporation,
o the sale or other disposition of all or substantially all of the
corporation's assets outside 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 prior to 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.
Set forth below is a summary of provisions in Southern Jersey's
certificate of incorporation and the Delaware General Corporation Law that,
under certain circumstances require greater than a majority of the votes
eligible to be cast or limit certain voting rights.
Under Delaware corporate law, unless otherwise specified in the
certificate of incorporation of a Delaware corporation, the amendment to the
certificate of incorporation, the sale or other disposition of all or
substantially all of the assets of a corporation, or the merger or consolidation
of a stock corporation with another stock corporation requires the affirmative
vote of a majority of the outstanding stock entitled to vote thereon (with
respect to the amendment of the certificate of incorporation, the affirmative
vote of a majority of the outstanding shares of stock of each class entitled to
vote thereon is also required).
Southern Jersey's certificate of incorporation contains a provision
requiring the affirmative vote of the holders of 80% of its outstanding shares
entitled to vote thereon in order to amend or restate its certificate of
incorporation in the event such amendment or restatement is brought on the
initiative of the Southern Jersey stockholders themselves. If the amendment or
restatement is brought on the initiative of Southern Jersey's board of
directors, then the amendment or restatement may be approved by a lesser
percentage, though not less than a majority of Southern Jersey's shares
outstanding and entitled to vote.
Southern Jersey's certificate of incorporation contains a "Business
Combinations" provision restricting certain transactions between Southern Jersey
and its "major stockholders", which are defined as those stockholders who
beneficially own greater than 10% of Southern Jersey's outstanding voting
shares, including, but not limited to, mergers, sales, leases, transfers, and/or
acquisitions involving a substantial part of the assets or stock of a major
stockholder, the issuance of securities, options or rights warrants to a major
stockholder, or certain other actions which may have the effect of increasing
the proportionate amount of voting stock held by a major stockholder in Southern
Jersey or any of its subsidiaries. This provision prohibits any such action or
attempted action unless (i) it is approved by the board of directors prior to
the time the major stockholder became a major stockholder; (ii) the major
stockholder sought and received unanimous prior approval form the board of
directors to become a major stockholder and the transaction in question was
approved by a majority of such directors; (iii) the transaction in question
received an 80% affirmative vote by the directors of Southern Jersey who were
directors immediately prior to the major stockholder becoming such; (iv) the
transaction in question was approved by both the holders of not less than 80% of
the outstanding stock entitled to vote thereon and the holders of not less than
80% of the outstanding voting stock not held by any major stockholder; or (v)
the transaction falls within the parameters of certain "fair price"
requirements.
Section 203 of the Delaware General Corporation Law, entitled "Business
Combinations with Interested Stockholders", prohibits an interested stockholder,
which is defined as a stockholder who directly or indirectly owns 15% or more of
the outstanding voting stock of a corporation, and a corporation from entering
into certain transactions or business combinations similar to those described in
the previous paragraph for three years after such person becomes an interested
stockholder, unless the transaction is approved by the board of directors prior
to his becoming an interested stockholder, the interested stockholder is the
holder of at least 85% of the voting stock of the corporation, or the
transaction is approved by the board of directors and then approved by the
affirmative vote of two-thirds of the outstanding voting stock of the
corporation, excluding those shares held by the interested stockholder himself.
Southern Jersey, as authorized by the Delaware General Corporation Law, has in
its certificate of incorporation, opted out of the foregoing provision, and has
substituted its own "Business Combinations" restrictions in its certificate of
incorporation as more fully described in the preceding paragraph.
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 Delaware corporate law, shareholders of a Delaware corporation do
not have cumulative voting rights in the election of directors unless the
certificate of incorporation so provides. Southern Jersey's certificate of
incorporation does not presently provide for cumulative voting.
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.
Delaware corporate law permits a Delaware corporation to provide for a
classified board of directors in its certificate of incorporation or by-laws.
Southern Jersey's certificate of incorporation provides that the board of
directors be divided into three classes, each of which contains approximately
one-third of the whole number of members of the board. Each class serves a
staggered term, with approximately one-third of the total number of directors
being elected each year.
Rights of Dissenting Shareholders
Shareholders of a New Jersey corporation who dissent from a merger,
consolidation, sale of all or substantially all of the corporation's assets or
certain other corporate transactions are generally entitled to appraisal rights.
No statutory right of appraisal exists, however, where the stock of the New
Jersey corporation is (i) listed on a national securities exchange, (ii) is held
of record by not less than 1,000 holders, or (iii) where the consideration to be
received pursuant to the merger, consolidation or sale consists of cash or
securities or other obligations which, after the transaction, will be listed on
a national securities exchange or held of record by not less than 1,000 holders.
Stockholders of a Delaware corporation who dissent from a merger or
consolidation of the corporation may be entitled to appraisal rights. There are
no statutory rights of appraisal with respect to stockholders of a corporation
whose shares are either (i) listed on a national securities exchange or
designated as a national market system security on an inter-dealer quotation
system by the National Association of Securities Dealers, Inc., or (ii) held of
record by more than 2,000 stockholders, where such stockholders receive only
shares of stock or depository receipts of the corporation surviving or resulting
from the merger or consolidation or shares of stock or depository receipts of
any other corporation which at the effective date of the merger or consolidation
will be either listed on a national securities exchange or designated as a
national market system security on an inter-dealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 stockholders (or cash in lieu of fractional share interests therein). The
exceptions from the Delaware statutory right of appraisal apply to the Southern
Jersey common stock since the Hudson United common stock to be received pursuant
to the Merger is presently listed on the New York Stock Exchange.
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.
Likewise, under Delaware corporate law, unless the certificate of
incorporation states otherwise (Southern Jersey's certificate of incorporation
is silent on this issue), any action which can be taken at a special or annual
stockholders' meeting may be taken without, or in lieu of, such meeting if the
written consent or consents setting forth the action to be taken are signed by
the holders of outstanding stock having not less than the minimum number of
votes necessary to authorize such action. Notwithstanding, the election of
directors may only be accomplished by unanimous written consent of the
outstanding stock entitled to vote unless all of the directorships to which
directors could be elected at an annual meeting held at the effective time of
such action are vacant and are filled by such action. Delaware corporate law
allows for a plan of merger or consolidation to be approved at a special or
annual meeting of the stockholders by the affirmative vote of a majority of the
outstanding stock entitled to vote thereon, or by written consent of a majority
of the outstanding stock entitled to vote in lieu of such special or annual
meeting of the stockholders.
Dividends
New Jersey corporate law generally provides that a New Jersey
corporation may declare and pay dividends on its outstanding stock so long as
the corporation is not insolvent and would not become insolvent as a consequence
of the dividend payment. Because funds for the payment of dividends by Hudson
United must come primarily from the earnings of Hudson United's bank subsidiary,
as a practical matter, any restrictions on the ability of Hudson United to pay
dividends act as restrictions on the amount of funds available for the payment
of dividends by Hudson United.
Delaware corporate law generally limits dividends by Southern Jersey to
an amount equal to the excess of the net assets of Southern Jersey (the amount
by which total assets exceed total liabilities) over its stated capital, or if
there is no such excess, to its net profits for the current and/or immediately
preceding fiscal year. Because Southern Jersey does not conduct any material
activities at the holding company level, its ability to pay dividends depends on
capital distributions from its subsidiaries.
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.
Under Delaware corporate law, the stockholders of a Delaware
corporation have the power to adopt, amend, or repeal the corporation's by-laws,
unless such powers also are reserved in the certificate of incorporation to the
board of directors. Southern Jersey's bylaws may also be amended by its board of
directors, and such power is concurrent with that of Southern Jersey's
shareholders.
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 that would eliminate or limit
directors' or officers' liability to the corporation or to its shareholders, for
monetary damage for breaches of their fiduciary duty of care. However, 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 the person's duty of loyalty to the corporation or
its shareholders,
o not in good faith or involving a knowing violation of law, or
o resulting in the person's receipt of an improper personal benefit.
Hudson United's certificate of incorporation contains provisions that
limit its directors' and officers' liability to the full extent permitted by New
Jersey law.
Under Delaware corporate law, a Delaware corporation may include in its
certificate of incorporation a provision which would, subject to the limitations
described below, eliminate or limit directors' liability (but not an officers'
liability) to the corporation or its shareholders, for monetary damage for
breaches of their fiduciary duty of care. A director cannot be relieved from
liability or otherwise indemnified for any breach of duty based upon an act or
omission:
o in breach of the director's duty of loyalty,
o not in good faith or involving intentional misconduct or knowing
violation of law,
o which constitutes willful or negligent conduct in paying dividends
or repurchasing stock out of other than lawfully available funds,
or
o resulting in the person's receipt of an improper personal benefit.
Southern Jersey's certificate of incorporation contains provisions which limit a
director's liability to the full extent permitted by Delaware law.
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.
There are no comparable provisions in Delaware corporate law and
Southern Jersey's certificate of incorporation is silent on this issue.
Preferred Stock
Under both New Jersey and Delaware law, if the Company's certificate of
incorporation so provides, the board of directors without shareholder approval
may issue preferred stock with the terms set by the board.
Hudson United's certificate of incorporation contains "blank check
preferred stock" provisions which authorize Hudson United's board of directors
to issue shares of authorized but unissued preferred stock without shareholder
approval.
Southern Jersey's certificate of incorporation also contains so-called
"blank check preferred stock" provisions -- provisions whereby Southern Jersey's
board of directors can issue new shares of authorized but unissued preferred
stock without shareholder approval. Southern Jersey does not currently have any
preferred stock issued or outstanding.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by Hudson United (Commission File No.
1-8660) with the SEC are hereby incorporated in this 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 28,
March 29, April 19, 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.
o Hudson United changed its name from HUBCO, Inc. on April 22, 1999
and documents filed before that date may be located on the SEC
Edgar database under that name.
The following documents filed by Southern Jersey (Commission File No.
0-12635) with the SEC are hereby incorporated in this 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 The description of Southern Jersey common stock set forth in
Southern Jersey's Registration Statement on Form 8-A filed by
Southern Jersey 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 Southern Jersey 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 (1) the date of the Southern Jersey meeting,
or (2) the termination of the merger agreement, are hereby incorporated by
reference into this document and shall be deemed a part of 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 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 proxy statement-prospectus.
The public may read and copy any documents Hudson United or Southern
Jersey file 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 Southern Jersey at
http://www.sec.gov.
<PAGE>
OTHER MATTERS
As of the date of this proxy statement, the Southern Jersey Board of
Directors knows of no other matters to be presented for action by the
shareholders at the meeting. If any other matters are properly presented,
however, it is the intention of the persons named in the enclosed proxy to vote
in accordance with their best judgment on such matters.
LEGAL OPINION
Pitney, Hardin, Kipp & Szuch, counsel to Hudson United, will pass upon
certain legal matters relating to the issuance of the shares of Hudson United
common stock offered hereby and certain tax consequences of the merger.
EXPERTS
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 have been incorporated by reference in this proxy
statement-prospectus in reliance upon the report of 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.
The consolidated financial statements of Southern Jersey as of December
31, 1998 and 1997 and for each of the years in the three-year period ended
December 31, 1998 have been incorporated by reference in this proxy
statement-prospectus and elsewhere in the registration statement, have been
audited by Athey & Company, independent public accountants, and Belfint, Lyons &
Shuman, P.A., as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of such firms as experts in
accounting and auditing in giving said reports.
Representatives of Athey & Company will be present at the 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 meeting.
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 28, 1999
and reflecting an amendment to Section 2.4 hereof made as of such date
("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, Southern Jersey Bancorp of Delaware, Inc., a Delaware
corporation and registered bank holding company ("SJBDI"), and Farmers and
Merchants National Bank, a national bank and wholly-owned subsidiary of SJBDI
("FAMNB").
RECITALS
The respective Boards of Directors of HUB and SJBDI have each
determined that it is in the best interests of HUB and SJBDI and their
respective shareholders for HUB to acquire SJBDI by merging SJBDI with and into
HUB with HUB surviving and SJBDI shareholders receiving the consideration
hereinafter set forth. Immediately after the merger of SJBDI into HUB, FAMNB
shall be merged with and into the Bank with the Bank surviving.
The respective Boards of Directors of SJBDI, HUB, the Bank and
FAMNB have each duly adopted and approved this Agreement and the Board of
Directors of SJBDI has directed that it be submitted to SJBDI'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
SJBDI Common Stock (as hereinafter defined) and, simultaneously with the
execution of this Agreement, SJBDI is issuing an option to HUB (the "HUB Stock
Option") to purchase certain shares of the authorized and unissued SJBDI Common
Stock subject to the terms and conditions set forth in the Agreement governing
the HUB Stock Option (the "HUB Stock Option Agreement").
As a condition for SJBDI to enter into this Agreement, SJBDI
has required that it receive a put option on certain authorized but unissued
shares of SJBDI Common Stock (as hereinafter defined) and, simultaneously with
the execution of this Agreement, HUB is issuing a put option to SJBDI (the
"SJBDI Put Option") to require HUB to purchase certain shares of the authorized
and unissued SJBDI Common Stock subject to the terms and conditions set forth in
the Agreement governing the HUB Stock Option Agreement.
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), SJBDI shall be merged
with and into HUB (the "Merger") in accordance with the New Jersey Business
Corporation Act (the "NJBCA") and the Delaware General Corporation Law (the
"DGCL") 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 SJBDI and thereupon and thereafter, all the property, rights,
privileges, powers and franchises of each of HUB and SJBDI 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 SJBDI 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 SJBDI 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 SJBDI 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 SJBDI 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 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 SJBDI, 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 SJBDI shall cause to be filed certificates of merger, in form and
substance satisfactory to HUB and SJBDI, with the Department of the Treasury,
State of New Jersey (the "New Jersey Certificate of Merger") and with the
Secretary of State of the State of Delaware (the "Delaware Certificate of
Merger" and, together with the New Jersey Certificate of Merger, the
"Certificates of Merger"). The Certificates of Merger shall specify the
"Effective Time" of the Merger, which Effective Time shall be a date and time
following the Closing agreed to by HUB and SJBDI (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 Certificates
of Merger, the Merger shall become effective upon (and the "Effective Time"
shall be) the time of the filing of the later of the two Certificates of Merger.
1.7 The Bank Merger. Immediately following the Effective Time,
FAMNB shall be then merged with and into the Bank (the "Bank Merger") in
accordance with the provisions of the New Jersey Banking Act of 1948, as amended
(the "Banking Act") and applicable federal law. In the Bank Merger, the Bank
shall be the surviving bank (the "Surviving Bank"). Upon the consummation of the
Bank Merger, the separate existence of FAMNB shall cease and the Surviving Bank
shall be considered the same business and corporate entity as FAMNB and the Bank
and all of the property, rights, privileges, powers and franchises of FAMNB 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 FAMNB
and the Bank and shall have succeeded to all or each of their relationships,
fiduciary or otherwise, as fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, obligations, duties and
relationships had been originally acquired, incurred or entered into by the
Surviving Bank. Upon the consummation of the Bank Merger, the certificate of
incorporation and Bylaws of the Bank shall be the certificate of incorporation
and Bylaws of the Surviving Bank and the officers and directors of the Bank
shall be the officers and directors of the Surviving Bank. Following the
execution of this Agreement, FAMNB and the Bank shall execute and deliver a
merger agreement (the "Bank Merger Agreement"), in form and substance reasonably
satisfactory to the parties hereto, as substantially set forth in Exhibit 1.7
hereto, for delivery to the Commissioner of the New Jersey Department of Banking
and Insurance (the "Department"), the Federal Deposit Insurance Corporation (the
"FDIC") and the Office of the Comptroller of the Currency (the "OCC") for
approval of the Bank Merger.
ARTICLE II - CONVERSION OF SJBDI SHARES
2.1. Conversion of SJBDI Common Stock. Each share of common
stock, par value $1.67 per share, of SJBDI ("SJBDI 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 SJBDI 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 1.26 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 SJBDI Certificates. After the Effective
Time, all such shares of SJBDI 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 SJBDI Common Stock outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such shares of
SJBDI Common Stock except as otherwise provided herein or by law. Such
certificates previously evidencing such shares of SJBDI 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 SJBDI Common Stock held by
SJBDI 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 SJBDI (the "Exchange Agent"), for the benefit of the holders of
shares of SJBDI 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 SJBDI Common Stock
(the "Certificates"), (i) a letter of transmittal (the form and substance of
which is reasonably agreed to by HUB and SJBDI 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 SJBDI 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 SJBDI Common Stock which is not registered in the transfer records
of SJBDI, 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 SJBDI 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 SJBDI Common Stock. All shares of HUB
Common Stock issued and cash paid upon conversion of the shares of SJBDI 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 SJBDI
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 on
the Closing Date. 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 SJBDI Common Stock for two
years after the Effective Time shall be delivered to HUB, upon demand, and any
holders of SJBDI Common Stock who have not theretofore complied with this
Article II shall thereafter look only to HUB for, and HUB will provide, 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 SJBDI 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 SJBDI 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 SJBDI 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 SJBDI shall be closed and there shall be no further
registration of transfers of shares of SJBDI Common Stock thereafter on the
records of SJBDI. 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. SJBDI Stock Options. Other than the HUB Stock Option, all
options which may be exercised for issuance of SJBDI Common Stock (each, a
"Stock Option" and collectively the "Stock Options") are described in the SJBDI
Disclosure Schedule and are issued and outstanding pursuant to the Stock Option
and Stock Appreciation Plans adopted on March 25, 1993 and December 8, 1994
(collectively, the "SJBDI 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 SJBDI Stock Option Plan
and the Option Grant Agreements, including those relating to vesting and
conversion in connection with a change in control of SJBDI. Each Stock Option
outstanding at the Effective Time shall be converted into the right to receive
immediately after the Effective Time a number of whole shares of HUB Common
Stock equal to the positive number (or zero, if the result is negative)
determined by (x) subtracting (i) the aggregate exercise price for the Stock
Option from (ii) the product determined by multiplying (A) the number of shares
of SJBDI Common Stock covered by the Stock Option, times (B) the Exchange Ratio,
times (C) the Median Pre-Closing Price, and (y) dividing the resulting number by
the Median Pre-Closing Price. No fractional shares of HUB Common Stock shall be
issued pursuant to this Section 2.4 and in lieu thereof, each optionee who would
otherwise be entitled to a fractional interest will receive an amount in cash
determined by multiplying such fractional interest by the Median Pre-Closing
Price.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SJBDI
References herein to "SJBDI 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 SJBDI to
HUB. SJBDI hereby represents and warrants to HUB as follows:
3.1. Corporate Organization.
(a) SJBDI is a corporation duly organized and validly existing
under the laws of the State of Delaware. SJBDI 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 SJBDI and the SJBDI
Subsidiaries (as defined below), taken as a whole. SJBDI is registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended (the
"BHCA").
(b) Each SJBDI Subsidiary and its jurisdiction of
incorporation is listed in the SJBDI Disclosure Schedule. For purposes of this
Agreement, the term "SJBDI Subsidiary" means any corporation, partnership, joint
venture or other legal entity in which SJBDI, directly or indirectly, owns at
least a 50% stock or other equity interest or for which SJBDI, 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 "SJBDI Subsidiary" shall include any entity
which was a SJBDI Subsidiary at any time during such period. The term "SJBDI
Subsidiary" shall not include any entity in which SJBDI's equity interest was
acquired pursuant to a debt previously contracted. FAMNB is a national bank duly
organized and validly existing in stock form under the laws of the United
States. All eligible accounts of depositors issued by FAMNB are insured by the
Bank Insurance Fund of the FDIC (the "BIF") to the fullest extent permitted by
law. Each SJBDI 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 SJBDI and the SJBDI Subsidiaries, taken as a whole.
(c) The SJBDI Disclosure Schedule sets forth true and complete
copies of the Certificate of Incorporation and Bylaws, as in effect on the date
hereof, of SJBDI and each SJBDI Subsidiary. Except as set forth in Disclosure
Schedule 3.1(b), FAMNB and SJBDI do not own or control, directly or indirectly,
any equity interest in any corporation, company, association, partnership, joint
venture or other entity.
3.2. Capitalization. The authorized capital stock of SJBDI
consists of 5,000,000 shares of SJBDI Common Stock, $1.67 par value, and 500,000
shares of SJBDI preferred stock, no par value ("SJBDI Preferred Stock"). As of
June 27, 1999, there were 1,307,683 shares of SJBDI Common Stock issued and
outstanding, including 179,602 treasury shares. As of June 27, 1999, there were
75,480 shares of SJBDI Common Stock issuable upon exercise of outstanding stock
options. No SJBDI Preferred Stock has been issued or is outstanding. The SJBDI
Disclosure Schedule contains (i) a list of all Stock Options, their strike
prices and expiration dates, and (ii) true and complete copies of the SJBDI
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 SJBDI Stock Option Plan and Option Grant Agreements pursuant to which such
Stock Options were granted. All issued and outstanding shares of SJBDI Common
Stock, and all issued and outstanding shares of capital stock of each SJBDI
Subsidiary, have been duly authorized and validly issued, are fully paid,
nonassessable (other than pursuant to federal law), and free of preemptive
rights and are free and clear of any liens, encumbrances, charges, restrictions
or rights of third parties imposed by SJBDI or any SJBDI Subsidiary. Except for
the Stock Options listed on the SJBDI Disclosure Schedule and the HUB Stock
Option and the SJBDI Put Option, neither SJBDI nor FAMNB 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 SJBDI or FAMNB 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; there are
no agreements or understandings with respect to voting of any such shares as to
which SJBDI or FAMNB is a party, and, to the knowledge of SJBDI, there are no
other 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 SJBDI, and except as set forth in the SJBDI Disclosure
Schedule, SJBDI and FAMNB 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 SJBDI and FAMNB in accordance with
their respective Certificates or Articles 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 SJBDI or FAMNB are
necessary to consummate the transactions so contemplated. Without limiting the
foregoing, the SJBDI Board of Directors has taken all actions necessary so that
the transactions contemplated hereby will not be adversely affected by SJBDI's
Shareholder Rights Agreement dated November 30, 1989, as amended (the "SJBDI
Shareholder Rights Plan"). This Agreement has been duly and validly executed and
delivered by SJBDI and FAMNB, and constitutes a valid and binding obligation of
each of SJBDI and FAMNB, enforceable against SJBDI and FAMNB 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 national 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
SJBDI or FAMNB, nor the consummation by SJBDI or FAMNB of the transactions
contemplated hereby in accordance with the terms hereof, or compliance by SJBDI
or FAMNB with any of the terms or provisions hereof, will (i) violate any
provision of SJBDI's or FAMNB' Certificate or Articles 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 SJBDI, FAMNB or any of their
respective properties or assets, or (iii) except as set forth in the SJBDI
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 SJBDI or FAMNB 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 SJBDI or FAMNB 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 SJBDI and the SJBDI
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 Department,
the OCC, the New Jersey Department of Environmental Protection (the "DEP") (if
required), the Securities and Exchange Commission (the "SEC"), and the
shareholders of SJBDI, 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 SJBDI or FAMNB in connection with (x) the execution and delivery by
SJBDI of this Agreement and (y) the consummation by SJBDI of the Merger, and the
consummation by SJBDI and FAMNB of the other transactions contemplated hereby,
except (i) such as are listed in the SJBDI 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
SJBDI and the SJBDI Subsidiaries taken as a whole or prevent or materially delay
the consummation of the transactions contemplated hereby. To the knowledge of
SJBDI, no fact or condition exists which SJBDI has reason to believe will
prevent it and FAMNB from obtaining the aforementioned consents and approvals.
3.4. Financial Statements; Reserves.
(a) The SJBDI Disclosure Schedule sets forth copies of the
consolidated statements of financial condition of SJBDI 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 Athey & Company, Certified Public Accountants, Professional
Association, independent public accountants with respect to SJBDI ("Athey &
Co."), and the unaudited consolidated statement of condition of SJBDI 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
SJBDI's Quarterly Report on Form 10-Q, filed with the SEC under the Securities
Exchange Act of 1934, as amended ("1934 Act") (collectively, the "SJBDI
Financial Statements"). In the opinion of the management of SJBDI and its
accountants, as of December 31, 1998, the allowance for loan losses in the SJBDI
Financial Statements was adequate pursuant to generally accepted accounting
principles ("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 OCC. In the opinion of the
management of SJBDI and its accountants, as of December 31, 1998, the reserve
for OREO properties (or if no reserve, the carrying value of OREO properties) in
the SJBDI 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 OCC. In all other respects, the SJBDI 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 condition of SJBDI 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 SJBDI for the respective periods set forth therein.
(b) The books and records of SJBDI and all of the SJBDI
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 SJBDI Financial Statements (including the notes
thereto), as of December 31, 1998, neither SJBDI nor any SJBDI Subsidiary had
any liabilities, whether absolute, accrued, contingent or otherwise, material to
the business, operations, assets or financial condition of SJBDI and the SJBDI
Subsidiaries, taken as a whole which were required by GAAP (consistently
applied) to be disclosed in SJBDI's consolidated statement of condition as of
December 31, 1998 or the notes thereto. Since December 31, 1998, neither SJBDI
nor any SJBDI 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
SJBDI Disclosure Schedule.
3.5. Broker's and Other Fees. Except as set forth on Section
3.5 of the SJBDI Disclosure Schedule, neither SJBDI nor the SJBDI 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. Other than as set forth on Section 3.5 of the SJBDI Disclosure
Schedule, there are no fees (other than time charges billed at usual and
customary rates) payable to any consultants, including lawyers and accountants,
in connection with this transaction or which would be triggered by consummation
of this transaction or the termination of the services of such consultants by
SJBDI or the SJBDI Subsidiaries.
3.6. Absence of Certain Changes or Events.
(a) Except as disclosed in the SJBDI Disclosure Schedule,
there has not been any SJBDI Material Adverse Change (as hereinafter defined)
since December 31, 1998 and to the knowledge of SJBDI, no fact or condition
exists which SJBDI believes will cause such a SJBDI Material Adverse Change in
the future. "SJBDI Material Adverse Change" means any change which is material
and adverse to the consolidated financial condition, results of operations,
business or assets of SJBDI and the SJBDI Subsidiaries taken as a whole, other
than (i) 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, (ii) reasonable expenses incurred in connection with this Agreement
and the transactions contemplated hereby, (iii) payments to executive officers
or other employees of SJBDI or FAMNB pursuant to agreements or arrangements with
such persons, which agreements or arrangements are included in the SJBDI
Disclosure Schedule, or (iv) actions or omissions of SJBDI or any SJBDI
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 SJBDI or FAMNB
pursuant to Section 5.15 of this Agreement).
(b) Except as set forth in the SJBDI Disclosure Schedule,
neither SJBDI nor any SJBDI Subsidiary has taken or permitted to be taken 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, SJBDI and each SJBDI Subsidiary has conducted their
respective businesses only in the ordinary course, consistent with past
practice.
3.7. Legal Proceedings. Except as disclosed in the SJBDI
Disclosure Schedule, and except for ordinary routine litigation incidental to
the business of SJBDI and the SJBDI Subsidiaries, neither SJBDI nor any SJBDI
Subsidiary is a party to any, and there are no pending or, to the knowledge of
SJBDI, threatened legal, administrative, arbitral or other proceedings, claims,
actions or governmental investigations of any nature against SJBDI or any SJBDI
Subsidiary which, if decided adversely to SJBDI or any SJBDI Subsidiary, are
reasonably likely to have a material adverse effect on the business, operations,
assets or financial condition of SJBDI and the SJBDI Subsidiaries taken as a
whole. Except as disclosed in the SJBDI Disclosure Schedule, neither SJBDI nor
any SJBDI Subsidiary is a party to any order, judgment or decree entered in any
lawsuit or proceeding which is material to SJBDI or such SJBDI Subsidiary.
3.8. Taxes and Tax Returns.
(a) SJBDI and each SJBDI 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. SJBDI and each
SJBDI 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 SJBDI or such SJBDI Subsidiary through such date. None of the federal
or state income tax returns of SJBDI or any SJBDI Subsidiary have been examined
by the Internal Revenue Service (the "IRS") or the New Jersey or Delaware
Divisions of Taxation within the past six years. To the knowledge of SJBDI,
except as disclosed in the SJBDI 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 SJBDI or any SJBDI Subsidiary, nor has SJBDI or any SJBDI 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) Except as disclosed in the SJBDI Disclosure Schedule,
neither SJBDI nor any SJBDI Subsidiary (i) has requested any extension of time
within which to file any Return which Return has not since been filed, (ii) is a
party to any agreement providing for the allocation or sharing of taxes, (iii)
is required to include in income any adjustment pursuant to Section 481(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), by reason of a
voluntary change in accounting method initiated by SJBDI or such SJBDI
Subsidiary (nor, to the knowledge of SJBDI, has the IRS 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) Except as set forth in Note 13 to the 1998 SJBDI Financial
Statements, neither SJBDI nor any SJBDI Subsidiary has any tax loss
carryforwards.
3.9. Employee Benefit Plans.
(a) Except as set forth on the SJBDI Disclosure Schedule,
neither SJBDI nor any SJBDI Subsidiary maintains or contributes to any "employee
pension benefit plan" (the "SJBDI 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 "SJBDI 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 SJBDI nor any SJBDI Subsidiary has, since
September 2, 1974, contributed to any "Multiemployer Plan," within the meaning
of Section 3(37) of ERISA.
(b) SJBDI has previously delivered to HUB, and included in the
SJBDI Disclosure Schedule, a complete and accurate copy of each of the following
with respect to each of the SJBDI Pension Plans and SJBDI 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 SJBDI 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 SJBDI Pension Plan's actuary, did
not exceed the then current value of the assets of such plans allocable to such
accrued benefits. To the knowledge of SJBDI, 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 SJBDI or
any SJBDI 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 SJBDI Pension Plan
have been paid. All contributions required to be made to each SJBDI 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 SJBDI which have not
been paid have been properly recorded on the books of SJBDI .
(f) Except as disclosed in the SJBDI Disclosure Schedule, each
of the SJBDI Pension Plans, SJBDI Welfare Plans and each other employee benefit
plan and arrangement identified on the SJBDI 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 SJBDI Disclosure Schedule, if SJBDI
maintains any SJBDI Pension Plan, SJBDI 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 SJBDI is not aware of any fact or circumstance which
would disqualify any plan.
(g) To the knowledge of SJBDI, 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 SJBDI Welfare Plan or SJBDI Pension Plan
that would result in any material tax or penalty for SJBDI or any SJBDI
Subsidiary.
(h) No SJBDI 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 SJBDI Pension Plan.
(i) No "accumulated funding deficiency," within the meaning of
Section 412 of the Code, has been incurred with respect to any SJBDI Pension
Plan.
(j) There are no material pending, or, to the knowledge of
SJBDI, material threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of, or against any of the SJBDI Pension Plans or the
SJBDI Welfare Plans, any trusts created thereunder or any other plan or
arrangement identified in the SJBDI Disclosure Schedule.
(k) Except as disclosed in the SJBDI Disclosure Schedule, no
SJBDI Pension Plan or SJBDI 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 SJBDI 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 SJBDI Financial Statements and
established in accordance with GAAP.
(m) With respect to each SJBDI Pension Plan and SJBDI Welfare
Plan that is funded wholly or partially through an insurance policy, there will
be no liability of SJBDI or any SJBDI 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 SJBDI Disclosure Schedule, and
(ii) as set forth in the SJBDI 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 SJBDI or any SJBDI 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 SJBDI
Pension Plan or SJBDI Welfare Plan.
(o) Except for the SJBDI Pension Plans and the SJBDI Welfare
Plans, and except as set forth on the SJBDI Disclosure Schedule, SJBDI has no
deferred compensation agreements, understandings or obligations for payments or
benefits to any current or former director, officer or employee of SJBDI or any
SJBDI Subsidiary or any predecessor of any thereof. The SJBDI 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 SJBDI Disclosure Schedule,
SJBDI 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 SJBDI 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 knowledge
of SJBDI, neither SJBDI nor any SJBDI Pension Plan or SJBDI 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 SJBDI Disclosure Schedule,
SJBDI does not maintain any retirement plan or retiree medical plan or
arrangement for directors. The SJBDI Disclosure Schedule sets forth the complete
documentation and actuarial evaluation of any such plan.
3.10. Reports.
(a) The SJBDI Disclosure Schedule lists, and as to item (i)
below SJBDI has previously delivered to HUB a complete copy of, each (i) final
registration statement, prospectus, annual, quarterly or current report and
definitive proxy statement filed by SJBDI 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 SJBDI to its shareholders as a class since January 1, 1997, and each
such communication, as of its date, complied in all material respects with all
applicable statutes, rules and regulations and did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading; provided
that information as of a later date shall be deemed to modify information as of
an earlier date.
(b) Since January 1, 1997, (i) SJBDI has filed all reports
that it was required to file with the SEC under the 1934 Act, and (ii) SJBDI and
FAMNB 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, SJBDI 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 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 SJBDI
Disclosure Schedule lists the dates of all examinations of SJBDI or FAMNB
conducted by either the FRB, the OCC or the FDIC since January 1, 1997 and the
dates of any responses thereto submitted by SJBDI or FAMNB.
3.11. SJBDI and FAMNB Information. The information relating to
SJBDI and FAMNB (unless objected to by SJBDI), this Agreement, and the
transactions contemplated hereby (except for information relating solely to HUB)
to be contained in the Proxy Statement-Prospectus (as defined in Section 5.6(a)
hereof) to be delivered to shareholders of SJBDI in connection with the
solicitation of their approval of the Merger, as of the date the Proxy
Statement-Prospectus is mailed to shareholders of SJBDI, and up to and including
the date of the meeting of shareholders to which such Proxy Statement-Prospectus
relates, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.12. Compliance with Applicable Law. Except as set forth in
the SJBDI Disclosure Schedule, SJBDI and each SJBDI 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 SJBDI or such SJBDI 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 SJBDI and the SJBDI Subsidiaries
taken as a whole) and SJBDI 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 SJBDI Disclosure Schedule, (i) neither SJBDI nor any SJBDI 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 SJBDI or
any SJBDI Subsidiary to any officer, employee, director or consultant thereof.
The SJBDI Disclosure Schedule sets forth true and correct copies of all
severance or employment agreements with officers, directors, employees, agents
or consultants to which SJBDI or any SJBDI Subsidiary is a party.
(b) Except as disclosed in the SJBDI Disclosure Schedule and
except for loan commitments, loan agreements and loan instruments entered into
or issued by FAMNB in the ordinary course of business, (i) as of the date of
this Agreement, neither SJBDI nor any SJBDI 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 SJBDI and the SJBDI Subsidiaries
taken as a whole, (ii) no commitment, agreement or other instrument to which
SJBDI or any SJBDI Subsidiary is a party or by which either of them is bound
limits the freedom of SJBDI or any SJBDI Subsidiary to compete in any line of
business or with any person, and (iii) neither SJBDI nor any SJBDI Subsidiary is
a party to any collective bargaining agreement.
(c) Except as disclosed in the SJBDI Disclosure Schedule,
neither SJBDI nor any SJBDI Subsidiary or, to the knowledge of SJBDI, 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 FAMNB 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 SJBDI and the SJBDI Subsidiaries, taken as a whole.
3.14. Properties and Insurance.
(a) Except as set forth in the SJBDI Disclosure Schedule,
SJBDI or a SJBDI 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 SJBDI'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 in the ordinary course of
business since December 31, 1998 either (A) to third parties in arms' length
transactions or (B) to insiders or to directors or officers of SJBDI pursuant to
the approval of the board of directors of SJBDI and for fair value), 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 SJBDI and the SJBDI 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, SJBDI or a SJBDI
Subsidiary as lessees have the right under valid and subsisting leases to
occupy, use, possess and control all real property leased by SJBDI and such
SJBDI Subsidiaries in all material respects as presently occupied, used,
possessed and controlled by SJBDI and SJBDI Subsidiaries.
(b) Except as set forth in the SJBDI Disclosure Schedule, the
business operations and all insurable properties and assets of SJBDI and each
SJBDI Subsidiary are insured for their benefit against all risks which, in the
reasonable judgment of the management of SJBDI, 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 SJBDI adequate for the
business engaged in by SJBDI and the SJBDI Subsidiaries. As of the date hereof,
neither SJBDI nor any SJBDI 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
SJBDI Disclosure Schedule sets forth in summary form a list of all insurance
policies of SJBDI and the SJBDI Subsidiaries.
3.15. Minute Books. The minute books of SJBDI and the SJBDI
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 SJBDI
Disclosure Schedule:
(a) Neither SJBDI nor any SJBDI Subsidiary has received any
written notice, citation, claim, assessment, proposed assessment or demand for
abatement alleging that SJBDI or such SJBDI 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 SJBDI and the SJBDI Subsidiaries taken as a whole. SJBDI 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 SJBDI
or any SJBDI Subsidiary, as OREO or otherwise, or owned or controlled by SJBDI
or any SJBDI Subsidiary as a trustee or fiduciary (collectively, "Properties"),
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 SJBDI and the SJBDI Subsidiaries, taken as a whole.
(b) SJBDI 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 SJBDI and the SJBDI Subsidiaries taken as a whole.
(c) To the knowledge of SJBDI, SJBDI, each SJBDI 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 SJBDI, 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 SJBDI or any SJBDI Subsidiary.
3.17. No Parachute Payments. No officer, director, employee or
agent (or former officer, director, employee or agent) of SJBDI or any SJBDI
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 SJBDI, a SJBDI
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.
3.18. Agreements with Bank Regulators. Except as disclosed in
Section 3.18 in the SJBDI Disclosure Schedule, neither SJBDI nor any SJBDI
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 SJBDI prior to the
date of this Agreement, nor has SJBDI 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 SJBDI prior to
the date of this Agreement. Except as disclosed in Section 3.18 in the SJBDI
Disclosure Schedule, neither SJBDI nor any SJBDI 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 SJBDI prior to the date of this
Agreement.
3.19. Year 2000 Compliance. SJBDI and the SJBDI 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 SJBDI and the SJBDI Subsidiaries to be
substantially Year 2000 compliant on or before the end of 1999 and, except as
set forth in the SJBDI Disclosure Schedule, SJBDI does not expect the future
cost of addressing such issues to be material. Neither SJBDI nor any SJBDI
Subsidiary has received a rating of less than satisfactory from any bank
regulatory agency with respect to Year 2000 compliance.
3.20. Accounting for the Merger: Reorganization. As of the
date hereof, after reviewing the terms of this Agreement, the stock repurchases
by HUB and SJBDI, and the employee benefit plans of SJBDI and FAMNB with SJBDI's
independent auditors, SJBDI 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.
3.21. Disclosure. No representation or warranty contained in
Article III of this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements herein not
misleading.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF 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
SJBDI. HUB hereby represents and warrants to SJBDI 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 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. The HUB Disclosure
Schedule sets forth true and complete copies of the Certificate of Incorporation
and Bylaws of HUB as in effect on the date hereof.
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 and
39,998,576 outstanding, and 634,628 shares of treasury stock, 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
and the Bank, nor the consummation by HUB and the Bank of the transactions
contemplated hereby in accordance with the terms hereof, or compliance by HUB
and the Bank with any of the terms or provisions hereof will (i) violate any
provision of the Certificate of Incorporation or Bylaws of HUB or the Bank, (ii)
assuming that the consents and approvals set forth below are duly obtained,
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to 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 OCC, the
Department, the SEC, or the Department of Treasury, State of New Jersey, 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 knowledge of HUB, 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 knowledge of
HUB, 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 SJBDI, 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 any HUB Subsidiaries, neither HUB nor any HUB Subsidiary
is a party to any, and there are no pending or, to the knowledge of HUB,
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 any HUB Subsidiaries, are
reasonably likely to have a material adverse effect on the business, operations,
assets or financial condition of HUB and the HUB Subsidiaries, taken as a whole.
Except as disclosed in the HUB Disclosure Schedule, neither HUB nor any HUB
Subsidiary is a party to any order, judgment or decree entered in any lawsuit or
proceeding which is material to HUB and the HUB Subsidiaries, taken as a whole.
4.8 Reports. Since January 1, 1997, HUB has filed all reports
that it was required to file with the SEC under the 1934 Act, all of which
complied in all material respects with all applicable requirements of the 1934
Act and the rules and regulations adopted thereunder. As of their respective
dates, each such report and each registration statement, proxy statement, form
or other document filed by HUB with the SEC, including without limitation, any
financial statements or schedules included therein, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date. Since January 1, 1997, HUB and each HUB Subsidiary has duly filed
all material forms, reports and documents which they were required to file with
each agency charged with regulating any aspect of their business, in each case
which was correct in all material respects.
4.9 HUB Information. The information relating to HUB and the
HUB 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 Proxy
Statement-Prospectus (as defined in Section 5.6(a) hereof), as of the date of
the mailing of the Proxy Statement-Prospectus, and up to and including the date
of the meeting of stockholders of SJBDI to which such Proxy Statement-Prospectus
relates, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement shall comply as to form in all
material respects with the provisions of the 1933 Act, the 1934 Act and the
rules and regulations promulgated thereunder.
4.10 Compliance With Applicable Law. Except as set forth in
the 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 the HUB 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. The HUB Common Stock to be issued hereunder pursuant to
the Merger, 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, 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. Except as set forth in
the HUB Disclosure Schedule, 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, 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 set forth
in the HUB Disclosure Schedule, 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.
4.14 Taxes and Tax Returns.
(a) HUB and the HUB 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 SJBDI in
writing) or against which reserves have been established. HUB and the HUB
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 the HUB
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 the HUB 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 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 the HUB Subsidiaries, nor
has HUB or the HUB 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 HUB Subsidiary (i) has requested any extension of time
within which to file any Return which Return has not since been filed, (ii) is a
party to any agreement providing for the allocation or sharing of taxes, (iii)
is required to include in income any adjustment pursuant to Section 481(a) of
the Code, by reason of a voluntary change in accounting method initiated by HUB
or the HUB 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 SJBDI, 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 Pension Benefit Guaranty
Corporation ("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. Except as disclosed in the HUB Disclosure
Schedule, neither HUB nor any of the HUB Subsidiaries, or to the 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 the HUB Subsidiaries, taken
as a whole.
4.17 Properties and Insurance.
(a) HUB and the HUB 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 the HUB 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 the HUB Subsidiaries as lessees have the right under valid and
subsisting leases to occupy, use, possess and control all property leased by HUB
or the HUB Subsidiaries in all material respects as presently occupied, used,
possessed and controlled by HUB and the HUB Subsidiaries.
(b) The business operations and all insurable properties and
assets of HUB and the HUB 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 the HUB Subsidiaries. As of the date
hereof, neither HUB nor any of the HUB 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 the HUB Subsidiaries has received
any written notice, citation, claim, assessment, proposed assessment or demand
for abatement alleging that HUB or any of the HUB Subsidiaries (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 HUB and the HUB 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 real property owned or leased by HUB or any of the HUB Subsidiaries , as
OREO or otherwise, or owned or controlled by HUB or any HUB Subsidiary as a
trustee or fiduciary, 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 the HUB 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 OCC. 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 OCC.
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 and SJBDI, other pending transactions involving HUB, and the employee
benefit plans of SJBDI and FAMNB 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 SJBDI Common Stock.
4.22 No Approval of HUB's Shareholders Currently Required.
Based upon laws and regulations applicable to HUB and currently in effect,
including the rules, regulations and policies of the NYSE, as of the date of
this Agreement, neither approval of this Agreement by the shareholders of HUB
nor approval of the transactions contemplated hereby by the shareholders of HUB
will be required.
4.23 Disclosure. No representation or warranty contained in
Article IV of this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements herein not
misleading.
ARTICLE V - COVENANTS OF THE PARTIES
5.1. Conduct of the Business of SJBDI. During the period from
the date of this Agreement to the Effective Time, SJBDI and FAMNB shall, and
shall cause each SJBDI Subsidiary to, conduct their respective businesses only
in the ordinary course and consistent with past business practice, except for
transactions permitted hereunder or with the prior written consent of HUB, which
consent will not be unreasonably withheld. Each of SJBDI and FAMNB also shall
use its reasonable best efforts to (i) preserve its business organization and
that of the SJBDI Subsidiaries intact, (ii) keep available to itself and the
SJBDI Subsidiaries the present services of their respective employees, and (iii)
preserve for itself and HUB the goodwill of its customers and those of the SJBDI
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
SJBDI Disclosure Schedule, or as permitted or required by this Agreement,
neither SJBDI nor FAMNB will:
(a) change any provision of its Certificate or Articles 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 SJBDI 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 as necessary
to redeem the rights granted under its Amended Stockholders Right Agreement
dated April 11, 1996; provided, however, that nothing contained herein shall be
deemed to affect the ability of FAMNB to pay dividends on their capital stock to
SJBDI; and provided, further, that this paragraph shall not prohibit SJBDI from
taking actions contemplated by Section 5.18 of this Agreement;
(d) grant any severance or termination pay (other than
pursuant to policies or contracts of SJBDI in effect on the date hereof and
disclosed to HUB in the SJBDI 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 SJBDI 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 SJBDI or FAMNB;
(f) make any capital expenditures in excess of $100,000 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 SJBDI 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 other extension of credit in an amount of $100,000 or more,
renew for a period in excess of one year any existing loan or other extension of
credit in an amount of $100,000 or more, or increase by $100,000 or more the
aggregate credit outstanding to any borrower or group of affiliated borrowers
except such loan initiations, renewals or increases that are committed as of the
date of this Agreement and identified on the SJBDI 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, SJBDI and FAMNB 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 SJBDI or either
of FAMNB (an "Acquisition Transaction"). Notwithstanding the foregoing, SJBDI
may enter into discussions or negotiations or provide information in connection
with an unsolicited possible Acquisition Transaction if the Board of Directors
of SJBDI, 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. SJBDI 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 SJBDI 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,
SJBDI agrees to provide HUB, and HUB agrees to provide SJBDI, 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), SJBDI will deliver to HUB and HUB will deliver to SJBDI
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, SJBDI will deliver to HUB and HUB will
deliver to SJBDI 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) SJBDI and FAMNB shall permit HUB and its representatives,
and HUB shall permit, and cause each HUB Subsidiary to permit, SJBDI and its
representatives, reasonable access to their respective properties, and shall
disclose and make available to HUB and its representatives, or SJBDI 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 SJBDI 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. Under circumstances in which the
restrictions of the preceding sentence apply, 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. Notwithstanding the foregoing, SJBDI
acknowledges that HUB may be involved in discussions concerning other potential
acquisitions and HUB shall not be obligated to disclose such information to
SJBDI 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.
(c) Without limiting the foregoing, HUB, directly or through
agents, for the 15 calendar day period (the "Due Diligence Period") immediately
following the date of this Agreement, shall have the right to perform due
diligence on SJBDI and FAMNB and a complete audit acquisition of SJBDI and
FAMNB. Within the Due Diligence Period, HUB shall have the right to terminate
this Agreement if the due diligence review by HUB causes HUB to reach a
conclusion about the financial condition, business, assets or the quality of the
representations and warranties of SJBDI or FAMNB, adverse from conclusions about
the same matters which HUB's senior executives held at the time HUB executed
this Agreement.
5.6. Regulatory Matters.
(a) For the purposes of holding the Shareholders Meeting (as
defined in Section 5.7 hereof), and qualifying under applicable federal and
state securities laws the HUB Common Stock to be issued to SJBDI 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 combined proxy statement and prospectus satisfying all applicable requirements
of applicable state and federal laws, including the 1933 Act, the 1934 Act and
applicable state securities laws and the rules and regulations thereunder (such
proxy statement and prospectus in the form mailed by SJBDI and HUB to the SJBDI
shareholders together with any and all amendments or supplements thereto, being
herein referred to as the "Proxy Statement-Prospectus" and the various documents
to be filed by HUB under the 1933 Act with the SEC to register the HUB Common
Stock for sale, including the Proxy Statement-Prospectus, are referred to herein
as the "Registration Statement").
(b) HUB shall furnish SJBDI with such information concerning
HUB and HUB Subsidiaries (including, without limitation, information regarding
other transactions which HUB is required to disclose) as is necessary in order
to cause the Proxy Statement-Prospectus, insofar as it relates to such
corporations, to comply with Section 5.6(a) hereof. HUB agrees promptly to
advise SJBDI if at any time prior to the Shareholders Meeting any information
provided by HUB in the Proxy Statement-Prospectus becomes incorrect or
incomplete in any material respect and promptly to provide SJBDI with the
information needed to correct such inaccuracy or omission. HUB shall promptly
furnish SJBDI with such supplemental information as may be necessary in order to
cause the 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 SJBDI
shareholders.
(c) SJBDI shall furnish HUB with such information concerning
SJBDI as is necessary in order to cause the Proxy Statement-Prospectus, insofar
as it relates to SJBDI, to comply with Section 5.6(a) hereof. SJBDI agrees
promptly to advise HUB if at any time prior to the Shareholders Meeting, any
information provided by SJBDI in the 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. SJBDI shall
promptly furnish HUB with such supplemental information as may be necessary in
order to cause the Proxy Statement-Prospectus, insofar as it relates to SJBDI
and FAMNB to comply with Section 5.6(a) after the mailing thereof to SJBDI
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. SJBDI shall promptly furnish HUB with such
information regarding the SJBDI shareholders as HUB requires to enable it to
determine what filings are required hereunder. SJBDI authorizes HUB to utilize
in such filings the information concerning SJBDI and FAMNB provided to HUB in
connection with, or contained in, the Proxy Statement-Prospectus. HUB shall
furnish SJBDI's counsel with copies of all such filings and keep SJBDI advised
of the status thereof. HUB and SJBDI shall as promptly as practicable file the
Registration Statement containing the Proxy Statement-Prospectus with the SEC,
and each of HUB and SJBDI shall promptly notify the other of all communications,
oral or written, with the SEC concerning the Registration Statement and the
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.
(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 OCC, the
Department and (if required) the DEP. Without limiting the foregoing, the
parties shall use reasonable business efforts to file for approval of the Merger
or waiver of the need for such approval 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) SJBDI 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 SJBDI 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. SJBDI agrees to provide HUB
with any non-confidential information, certificates, documents or other
materials about SJBDI 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. SJBDI 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 SJBDI for reasonable expenses thus incurred by SJBDI 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 SJBDI unless SJBDI shall have consented in writing to such
filing, which consent shall not be unreasonably delayed or withheld.
(i) Between the date of this Agreement and the Effective Time,
SJBDI shall cooperate with HUB to reasonably conform SJBDI's policies and
procedures regarding applicable regulatory matters to those of HUB, as HUB may
reasonably identify to SJBDI from time to time.
5.7. Approval of Shareholders. SJBDI will (i) take all steps
necessary duly to call, give notice of, convene and hold a meeting of the
shareholders of SJBDI (the "Shareholders Meeting") for the purpose of securing
the approval of those shareholders of this Agreement, (ii) subject to the
qualification set forth in Section 5.3 hereof and the right not to make a
recommendation or to withdraw a recommendation if (x) its investment banker
withdraws its fairness opinion prior to the Shareholders Meeting or (y) SJBDI'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 SJBDI 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.
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.
(b) HUB agrees that from the date hereof to the Effective
Time, except as otherwise approved by SJBDI 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 $.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, SJBDI and FAMNB will use reasonable efforts
to cause the Merger to occur on or before November 30, 1999.
5.9. Public Announcements. HUB and SJBDI 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 SJBDI 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
SJBDI 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, SJBDI and HUB will promptly
inform the other of any facts applicable to SJBDI 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
SJBDI to honor the existing written employment and severance contracts with
officers and employees of SJBDI and FAMNB that are included in the SJBDI
Disclosure Schedule, including without limitation the deferred compensation
agreements with Clarence D. McCormick, Sr., the Chairman of SJBDI ("McCormick,
Sr.") and Clarence D. McCormick, Jr., the President of SJBDI ("McCormick, Jr.").
(b) Following consummation of the Merger, HUB will decide
whether to continue FAMNB and/or SJBDI's pension and welfare plans for the
benefit of employees of FAMNB and SJBDI, or to have such employees become
covered under a HUB Pension and Welfare Plan. If HUB decides to cover FAMNB and
SJBDI employees under a HUB Pension and Welfare Plan, such employees will
receive credit for prior years of service with FAMNB and/or SJBDI 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 SJBDI
or FAMNB 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 SJBDI 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
SJBDI or FAMNB or any successor or predecessor thereto or other SJBDI
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, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties or willful
violation of any law, rule, or regulation (other than traffic violations or
similar offenses). Following the expiration of the foregoing severance policy,
any years of service recognized for purposes of this Section 5.11(c) will be
taken into account under the terms of any applicable severance policy of HUB.
(d) Employees of SJBDI and FAMNB 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 SJBDI or FAMNB 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 SJBDI and FAMNB 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 SJBDI or FAMNB, 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) SJBDI and FAMNB 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 SJBDI's earnings
to fall below budgeted amounts.
(g) During the Due Diligence Period, HUB and SJBDI shall agree
upon those employees of SJBDI or FAMNB who shall be eligible to receive a
"retention" bonus in an amount that HUB and SJBDI shall agree upon. Each
retention bonus shall be payable in the event that the employee (i) remains an
employee of SJBDI or FAMNB, as applicable, until the earlier of the fifteenth
day following successful substantial completion of the conversion of FAMNB's
computer systems to those of the Bank or June 30, 2000 and (ii) satisfactorily
fulfills the duties and responsibilities of the position of the employee through
such time; provided that HUB at its option may select an earlier time for
payment of any retention bonus; and provided, further, that retention bonuses,
in the aggregate, shall not exceed $250,000.
(h) 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.
(j) Prior to the Closing and effective as of the Effective
Time, HUB and SJBDI shall enter into non-compete agreements (the "Non-Compete
Agreements") with McCormick, Sr. and McCormick, Jr. having the terms set forth
in Section 5.11(j) of the HUB Disclosure Schedule, and other terms reasonably
satisfactory to HUB, and shall enter into such other agreements or arrangements
with HUB as are described in Section 5.11(j) of the HUB Disclosure Schedule.
(k) HUB at the Closing will offer each director of SJBDI a
position on a HUB regional advisory board.
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 SJBDI.
(a) For planning purposes, SJBDI shall, within 30 days from
the date hereof, provide HUB with its estimated budget of transaction-related
expenses reasonably anticipated to be payable by SJBDI 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. SJBDI 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, SJBDI
shall ask all of its attorneys and other professionals to render current and
correct invoices for all unbilled time and disbursements. SJBDI shall accrue
and/or pay all of such amounts as soon as possible.
(c) SJBDI shall cause its professionals to render monthly
invoices within 15 days after the end of each month. SJBDI shall advise HUB
monthly of all out-of-pocket expenses which SJBDI has incurred in connection
with this transaction.
(d) HUB, in reasonable consultation with SJBDI, shall make all
arrangements with respect to the printing and mailing of the Proxy
Statement-Prospectus.
5.14 Indemnification.
(a) For a period of six years after the Effective Time, 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 SJBDI or FAMNB or serves or has served
at the request of SJBDI or FAMNB 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 SJBDI or FAMNB or serves or has served
at the request of SJBDI or FAMNB 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 SJBDI or FAMNB or any of their respective affiliates, or
by any former or present shareholder of SJBDI (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 SJBDI or FAMNB or
of any committee of SJBDI's or FAMNB's Board of Directors, the events leading up
to the execution of this Agreement, any statement, recommendation or
solicitation made in connection therewith or related thereto and any breach of
any duty in connection with any of the foregoing, or (ii) the enforcement of the
obligations of HUB set forth in this Section 5.14, in each case to the fullest
extent which SJBDI or FAMNB 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 SJBDI or FAMNB immediately prior to the Effective Time
with respect to the indemnification of the Indemnitees arising out of the
Certificate of Incorporation or Bylaws of SJBDI or FAMNB, or arising out of any
written indemnification agreements between SJBDI and/or FAMNB and such persons
disclosed in the SJBDI 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 SJBDI's and FAMNB's 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 SJBDI's and FAMNB's 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 SJBDI's and FAMNB's 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 Merger. Notwithstanding that SJBDI
believes that it has established all reserves and taken all provisions for
possible loan losses required by GAAP and applicable laws, rules and
regulations, SJBDI 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
Merger, SJBDI and HUB shall consult and cooperate with each other with respect
to (i) conforming to the extent appropriate, based upon such consultation,
SJBDI's loan, accrual and reserve policies and SJBDI'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 SJBDI from time to time, (ii) new extensions
of credit or material revisions to existing terms of credits by FAMNB, in each
case where the aggregate exposure exceeds $100,000, and (iii) conforming, based
upon such consultation, the composition of the investment portfolio and overall
asset/liability management position of SJBDI and FAMNB to the extent
appropriate; provided that any required change in SJBDI'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 HUB agrees in writing that all conditions precedent to the Closing have
occurred and HUB has provided the Closing Notice. No accrual or reserve made by
SJBDI or any SJBDI 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 SJBDI 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 SJBDI, and SJBDI shall cause Athey
& Co., its independent public accountants, to deliver to HUB and to its officers
and directors who sign the Registration Statement for this transaction, a
short-form "comfort letter" or "agreed upon procedures" letter, dated the date
of the mailing of the Proxy Statement-Prospectus for the Shareholders Meeting,
in the form customarily issued by such accountants at such time in transactions
of this type.
5.18 Regulatory Capital Issues. FAMNB is currently required by
the OCC to attain a leverage capital ratio of 6% by September 30, 1999 (the
"Regulatory Capital Requirement"). Promptly following the execution of this
Agreement, FAMNB shall request a waiver of the Regulatory Capital Requirement
from the OCC pending consummation of the Merger. If FAMNB fails to obtain such a
waiver, or if the OCC imposes conditions to the granting of such a waiver, SJBDI
and FAMNB shall confer with HUB regarding the appropriate method of complying
with the Regulatory Capital Requirement or the conditions to the waiver, as the
case may be, and SJBDI and FAMNB shall use their best efforts to comply with the
Regulatory Capital Requirement or the conditions to the waiver in a manner which
(a) does not involve the issuance of additional shares of SJBDI Common Stock and
(b) would not cause the Merger to fail to qualify for pooling-of-interests
accounting treatment. If, despite compliance with this Section 5.18, SJBDI or
FAMNB must take actions which would cause the Merger not to qualify for
pooling-of-interests accounting treatment, HUB shall have the right to terminate
this Agreement upon the taking of such actions by SJBDI or FAMNB.
5.19 Affiliates. Promptly, but in any event within two weeks,
after the execution and delivery of this Agreement, SJBDI shall deliver to HUB
(a) a letter identifying all persons who, to the knowledge of SJBDI, may be
deemed to be affiliates of SJBDI under Rule 145 of the 1933 Act and the
pooling-of-interests accounting rules, including, without limitation, all
directors and executive officers of SJBDI and (b) use its reasonable best
efforts to cause each person who may be deemed to be an affiliate of SJBDI 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 to enter into letter
agreements in the form of Exhibit 5.19-2 with HUB concerning the
pooling-of-interests accounting rules. HUB hereby agrees to publish, or file a
Form 8-K, Form 10-K or Form 10-Q containing, financial results covering at least
30 days of post-Merger combined operations of HUB and SJBDI as soon as
practicable (but in no event later than 15 days) following the close of the
first calendar month ending 30 days after the Effective Time, in form and
substance sufficient to remove the restrictions set forth in paragraph "B" of
Exhibit 5.19-1.
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 SJBDI. 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 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 Department, the FRB, the OCC, the SEC and (if
necessary) the DEP) required to consummate the transactions contemplated hereby
shall have been obtained without the imposition of any non-standard or
non-customary term or condition which would materially impair the value of SJBDI
and FAMNB, 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 SJBDI 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 SJBDI shall each have received an
opinion, dated as of the Effective Time, of Pitney, Hardin, Kipp & Szuch,
reasonably satisfactory in form and substance to SJBDI 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 SJBDI; (iii) no gain or loss will be
recognized by the SJBDI shareholders upon the exchange of SJBDI Common Stock
solely for HUB Common Stock; (iv) the tax basis of any HUB Common Stock received
in exchange for SJBDI Common Stock shall equal the basis of the recipient's
SJBDI 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 SJBDI Common Stock will include the period during which
SJBDI 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 SJBDI, 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 SJBDI and FAMNB. Except for those representations which are made as of a
particular date, the representations and warranties of SJBDI 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. SJBDI 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 SJBDI 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 SJBDI 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 SJBDI, 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. SJBDI 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. SJBDI shall have furnished HUB with letters
from all attorneys representing SJBDI and FAMNB 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. SJBDI 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 SJBDI, other than printing expenses (which are within the control of
HUB), shall be reasonable, taking into account normal and customary billing
rates, fees and expenses for similar transactions.
(f) Non-Compete Agreements. Each of McCormick, Sr. and
McCormick, Jr. shall have executed and delivered to HUB the Non-Compete
Agreements as set forth in Section 5.11.
6.3. Conditions to the Obligations of SJBDI Under this
Agreement. The obligations of SJBDI 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. SJBDI shall have received an
opinion of counsel to HUB, dated the Closing Date, in form and substance
reasonably satisfactory to SJBDI, substantially to the effect set forth in
accordance with Exhibit 6.3(b) hereto.
(c) Fairness Opinion. SJBDI shall have received an opinion
from First Capital Group, LLC, dated no more than three days prior to the date
the Proxy Statement-Prospectus is mailed to SJBDI's shareholders (and if it
shall become necessary to resolicit proxies thereafter, dated no more than three
days prior to the date of any substantive amendment to the Proxy
Statement-Prospectus), to the effect that, in its opinion, the consideration to
be paid to shareholders of SJBDI hereunder is fair to such shareholders from a
financial point of view ("Fairness Opinion").
(d) Certificates. HUB shall have furnished SJBDI with such
certificates of its officers and such other documents to evidence fulfillment of
the conditions set forth in this Section 6.3 as SJBDI 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 SJBDI:
(a) by mutual written consent of the parties hereto;
(b) by HUB or SJBDI (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 SJBDI 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 required by NYSE rules, such vote is taken and
such shareholders fail to approve this Agreement at the meeting (or any
adjournment or postponement thereof) held for such purpose (provided that the
terminating party shall not be in material breach of any of its obligations
under Section 5.7 hereof);
(c) by HUB or SJBDI 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 SJBDI 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 SJBDI and FAMNB, taken as a whole, to HUB;
(d) by HUB if (i) there shall have occurred a SJBDI Material
Adverse Change from that disclosed by SJBDI in SJBDI'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 SJBDI (it being understood that those matters
disclosed in the SJBDI 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 SJBDI hereunder
and such breach shall not have been remedied within 30 days after receipt by
SJBDI of notice in writing from HUB to SJBDI specifying the nature of such
breach and requesting that it be remedied;
(e) by SJBDI, 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 SJBDI specifying the nature of such breach and requesting that it
be remedied;
(f) by SJBDI, if SJBDI'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 SJBDI 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 HUB within the Due Diligence Period if HUB, if the due
diligence review by HUB causes HUB to reach a conclusion about the financial
condition, business, assets or the quality of the representations and warranties
of SJBDI or FAMNB, adverse from conclusions about the same matters which HUB's
senior executives held at the time HUB executed this Agreement; or
(j) by SJBDI, if (either before or after the approval of this
Agreement by the stockholders of SJBDI) 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 SJBDI elects to exercise its
termination right pursuant to this subsection (j), 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 SJBDI 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 SJBDI of such election and the revised
Exchange Ratio, whereupon no termination shall have occurred pursuant to this
subsection (j) 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 (j).
(k) by HUB during the Due Diligence Period if the due
diligence review by HUB causes HUB to reach a conclusion about the financial
condition, business, assets or the quality of the representations and warranties
of SJBDI or FAMNB, adverse from conclusions about the same matters which HUB's
senior executives held at the time HUB executed this Agreement.
7.2. Effect of Termination. In the event of the termination
and abandonment of this Agreement by either HUB or SJBDI 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 SJBDI 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 SJBDI 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, SJBDI may bear the expenses of FAMNB.
(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 SJBDI, to:
Southern Jersey Bancorp of Delaware, Inc.
53 South Laurel Street
Bridgeton, NJ 08302
Attn: Clarence D. McCormick, Sr., Chairman and CEO
Copy to:
Block and Balestri, P.C.
15851 Dallas Parkway
Suite 1020
Addison, TX 75001
Attn: Steven R. Block, 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. In the event HUB 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, then proper
provision shall be made so that such resulting, continuing or surviving
corporation or entity assumes the obligations of HUB in this Agreement.
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.
8.9. Knowledge. Whenever the phrase "to the knowledge of
SJBDI" or another similar qualification is used herein, the relevant knowledge
shall refer to the actual knowledge of McCormick Sr., McCormick, Jr., and the
Chief Financial Officer of SJBDI. Whenever the phrase "to the knowledge of HUB"
or another similar qualification is used herein, the relevant knowledge shall
refer to the actual knowledge of HUB's Chief Executive Officer, Chief Financial
Officer and Senior Loan Officer.
IN WITNESS WHEREOF, HUB, the Bank, SJBDI and FAMNB 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
VIRGINIA A. LAZALA D. LYNN VAN BORKULO-NUZZO
By: ________________________ By: ___________________________
Virginia A. Lazala D. Lynn Van Borkulo-Nuzzo,
Assistant Corporate Secretary Executive Vice-President
ATTEST: SOUTHERN JERSEY BANCORP
OF DELAWARE, INC.
PAUL J. RITTER, III CLARENCE D. McCORMICK, SR.
By: ________________________ By: _________________________________
Paul J. Ritter, III, Clarence D. McCormick, Sr.,
Assistant Secretary Chairman and CEO
ATTEST: HUDSON UNITED BANK
VIRGINA A. LAZALA D. LYNN VAN BORKULO-NUZZO
By: ________________________ By: _________________________________
Virgina A. Lazala, D. Lynn Van Borkulo-Nuzzo,
Assistant Corporate Secretary Executive Vice-President
ATTEST: FARMERS AND MERCHANTS
NATIONAL BANK
PAUL J. RITTER, III CLARENCE D. McCORMICK, SR.
By: ________________________ By: _________________________________
Paul J. Ritter, III, Clarence D. McCormick, Sr.,
Assistant Secretary Chairman
<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 Southern Jersey Bancorp of
Delaware, Inc., a Delaware corporation and registered bank holding company
("SJBDI").
BACKGROUND
WHEREAS, HUB and SJBDI, as of the date hereof, are prepared to
execute a definitive agreement and plan of merger (the "Merger Agreement")
pursuant to which SJBDI will be merged with and into HUB (the "Merger"); and
WHEREAS, HUB has advised SJBDI that it will not execute the
Merger Agreement unless SJBDI executes this Agreement and SJBDI has advised HUB
that it will not execute the Merger Agreement unless HUB executes this
Agreement; and
WHEREAS, the Board of Directors of SJBDI has determined that
the Merger Agreement provides substantial benefits to the shareholders of SJBDI;
and
WHEREAS, the Board of Directors of HUB has determined that the
Merger Agreement provides substantial benefits to the shareholders of HUB; and
WHEREAS, as an inducement to HUB to enter into the Merger
Agreement and in consideration for such entry, SJBDI desires to grant to HUB an
option to purchase authorized but unissued shares of common stock of SJBDI in an
amount and on the terms and conditions hereinafter set forth; and
WHEREAS, as an inducement to SJBDI to enter into the Merger
Agreement and in consideration for such entry, HUB desires to grant to SJBDI the
right to require HUB to purchase authorized but unissued shares of common stock
of SJBDI to HUB 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 SJBDI,
intending to be legally bound hereby, agree:
1. Grant of Option. SJBDI hereby grants to HUB an option to
purchase 200,000 shares of common stock, $1.67 par value, of SJBDI (the "Common
Stock") at a price of $24.00 per share (the "Option Price"), on the terms and
conditions set forth herein (the "Option").
2. Exercise of Option. The Option shall not be exercisable
until the occurrence of an Option Triggering Event (as such term is hereinafter
defined). Upon or after the occurrence of an Option Triggering Event, 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 22 of this Agreement.
The term "Option 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 SJBDI pursuant to which such person or any affiliate of
such person would (i) merge or consolidate, or enter into any similar
transaction, with SJBDI, (ii) acquire all or a significant portion of the assets
or liabilities of SJBDI, 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, SJBDI or any other
business combination involving SJBDI, 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 SJBDI called to vote on
the Merger and SJBDI'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, SJBDI 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 "Option Triggering Event" also means the taking of
any material direct or indirect action by SJBDI 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 SJBDI,
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 SJBDI. 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 SJBDI 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, without limitation, any filing, approval or
consent required under the rules and regulations of the National Association of
Securities Dealers, Inc., (the "NASD"), necessary for SJBDI 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.
SJBDI shall notify HUB promptly in writing of the occurrence
of any Option Triggering Event known to it, it being understood that the giving
of such notice by SJBDI shall not be a condition to the right of HUB to exercise
the Option. SJBDI will not take any action which would have the effect of
preventing or disabling SJBDI 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 SJBDI (the date of which is hereinafter referred to as the
"Option 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 Option 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. Grant of Put. HUB hereby grants to SJBDI the right to
require HUB to purchase 200,000 shares of Common Stock at the Option Price, on
the terms and conditions set forth herein (the "Put").
4. Exercise of Put. This Put shall be exercisable following
the "Put Triggering Event," which is the termination of the merger agreement by
any party thereto. Upon or after the occurrence of a Put Triggering Event, SJBDI
may exercise the Put, in whole or in part, on one occasion only, within six
months after the Put Triggering Event, subject to the terms and conditions set
forth herein and the termination provisions of Section 22 of this Agreement.
Notwithstanding the foregoing, HUB shall not be obligated to
purchase any Put Shares (i) in the absence of any required governmental or
regulatory approval or consent, including, without limitation, any filing,
approval or consent required under the rules and regulations of the NASD
necessary for SJBDI to issue the shares of Common Stock covered by the Put (the
"Put Shares") or HUB to purchase the Put Shares or prior to the expiration or
termination of any waiting period required by law, or (ii) if as a condition
precedent to obtaining any regulatory approval or consent, HUB is required to
take or refrain from taking any action or to agree to take or refrain from
taking any action which HUB reasonably determines would materially impair the
value of the Put Shares or would impose a material operating or financial burden
on HUB, or (iii) 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 Put Shares. HUB will make reasonable
efforts promptly to obtain all necessary regulatory approvals upon exercise of
the Put.
HUB will not take any action which would have the effect of
preventing or disabling HUB from purchasing the Put Shares from SJBDI upon
exercise of the Put or otherwise performing its obligations under this
Agreement, except to the extent required by applicable securities and banking
laws and regulations, provided, however, that this paragraph shall not restrict
in any way HUB's ability to negotiate, enter into, or consummate mergers or
acquisitions.
In the event SJBDI wishes to exercise the Put, SJBDI shall
send a written notice (the "Put Notice") to HUB (the date of which is
hereinafter referred to as the "Put Notice Date") specifying the total number of
Put Shares it wishes to sell and a place and date between two and ten business
days inclusive from the Put Notice Date for the closing of such a sale (a
"Closing"); provided, however, that a Closing shall not occur prior to two days
nor more than ten days after the later of receipt of any necessary regulatory
approvals and the expiration of any legally required notice or waiting period,
if any.
5. Payment and Delivery of Certificates. At any Closing
hereunder (a) HUB will make payment to SJBDI of the aggregate price for the
Option or Put Shares so purchased by wire transfer of immediately available
funds to an account designated by SJBDI; (b) SJBDI will deliver to HUB a stock
certificate or certificates representing the number of Option or Put Shares so
purchased, free and clear of all liens, claims, charges and encumbrances of any
kind or nature whatsoever created by or through SJBDI, 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 or Put Shares so purchased.
If required under applicable federal securities laws, a legend
will be placed on each stock certificate evidencing Option or Put 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 SJBDI, 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 6 hereof.
6. Registration Rights. Upon or after the occurrence of an
Option Triggering Event or a Put Exercise and upon receipt of a written request
from HUB, SJBDI shall, if necessary for the resale of the Option or the Option
or Put 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 or Put Shares as HUB shall specify in its
request. SJBDI 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 or Put Shares, as the case may be, provided that
HUB shall in no event have the right to have more than one such registration
statement become effective, and provided further that SJBDI shall not be
required to prepare and file any such registration statement in connection with
any proposed sale with respect to which counsel to SJBDI delivers to SJBDI 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 SJBDI may delay any
registration of Option or Put Shares above for a period not exceeding 90 days in
the event that SJBDI shall in good faith determine that any such registration
would adversely effect an offering of securities by SJBDI for cash. HUB shall
provide all information reasonable requested by SJBDI for inclusion in any
registration statement to be filed hereunder.
In connection with such filing, SJBDI 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 SJBDI 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 SJBDI and blue sky fees and expenses shall be paid by SJBDI.
Underwriting discounts and commissions to brokers and dealers relating to the
Option or Put 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, SJBDI 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 SJBDI 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 SJBDI 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 SJBDI 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 or inclusion in such preliminary or final
registration statement or such amendment or supplement thereto; and HUB will
reimburse SJBDI for any legal or other expense reasonably incurred by SJBDI 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.
7. 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 or Put 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 SJBDI
with another entity, or any sale of all or substantially all of the assets of
SJBDI, 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 the 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 the 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.
8. Filings and Consents. Each of HUB and SJBDI 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 or Put 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 each party agrees to cooperate with and furnish to the other such
information and documents as may be reasonably required to secure such
approvals.
9. Representations and Warranties of SJBDI. SJBDI hereby
represents and warrants to HUB as follows:
a. Due Authorization. SJBDI 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 SJBDI.
b. Authorized Shares. SJBDI 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 SJBDI or any agreement, instrument,
judgment, decree or order applicable to SJBDI.
10. Representations and Warranties of HUB. HUB hereby
represents and warrants to SJBDI as follows:
a. Due Authorization. HUB 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 HUB.
b. 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 HUB or any agreement, instrument,
judgment, decree or order applicable to HUB.
11. 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, each party shall have the right to seek money
damages against the other for a breach of this Agreement.
12. 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.
13. Assignment or Transfer. Neither party may sell, assign or
otherwise transfer its rights and obligations hereunder, in whole or in part, to
any person or group of persons, except that HUB may transfer its rights
hereunder to an affiliate. 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 or Put Shares are 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.
14. 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.
15. 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.
16. Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered personally, by express service,
cable, telegram or telex, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
If to HUB:
Hudson United Bancorp
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Attention: Kenneth T. Neilson
President and Chief Executive Officer
With a copy to:
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Florham Park, New Jersey 07932-0950
Attention: Ronald H. Janis, Esq.
Michael W. Zelenty, Esq.
If to SJBDI:
Southern Jersey Bancorp of Delaware, Inc.
53 South Laurel Street
Bridgeton, New Jersey 08302
Attention: Clarence D. McCormick, Sr.
Chairman and Chief Executive Officer
With a copy to:
Block & Balestri, P.C.
15851 Dallas Parkway
Suite 1020
Addison, Texas 75001
Attention: Steven R. Block, 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).
17. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
18. 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.
19. 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.
20. 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.
21. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
22. 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 (i) if termination of the Merger Agreement occurs after the occurrence of
an Option Triggering Event (as defined in Section 2 hereof), this Agreement
shall not terminate until the later of 24 months following the date of the
termination of the Merger Agreement or the consummation of any proposed
transactions which constitute the Triggering Event and (ii) if termination of
the Merger Agreement occurs pursuant to a Put Triggering Event (as defined in
Section 4 hereof), this Agreement shall terminate six 6 months after such Put
Triggering Event, unless the Put Notice has been delivered prior thereto, in
which case this Agreement shall terminate following the Closing under such Put
Notice.
23. Cut-Back. Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock subject to the Option and
the Put shall be automatically reduced if, and only to the extent, necessary to
avoid HUB becoming (either by virtue of the execution and delivery of this
Agreement or by virtue of the exercise of the Option or Put) an "Acquiring
Person" under the Amended Stockholders Rights Agreement dated as of April 11,
1996 by and between SJBDI and The Farmers and Merchants National Bank of
Bridgeton.
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.
SOUTHERN JERSEY BANCORP
OF DELAWARE, INC.
CLARENCE D. McCORMICK, SR.
By:--------------------------------------
Clarence D. McCormick, Sr.
Chairman & Chief Executive Officer
HUDSON UNITED BANCORP
D. LYNN VAN BORKULO-NUZZO
By:---------------------------------------
D. Lynn Van Borkulo-Nuzzo,
Executive Vice-President
<PAGE>
APPENDIX C
FIRST CAPITAL GROUP, L.L.C.
INVESTMENT BANKERS & FINANCIAL ADVISORS
August 10, 1999
Board of Directors
Southern Jersey Bancorp of Delaware, Inc.
53 South Laurel Street
Bridgeton, New Jersey 08302
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of common stock of Southern
Jersey Bancorp of Delaware, Inc. ("SJBD"), of the consideration (the "Merger
Consideration") to be received by such holders pursuant to the Agreement and
Plan of Merger dated as of June 28, 1999 (the "Merger Agreement"), incorporated
by reference therein, which provides for the merger (the "Merger") of SJBD with
and into Hudson United Bancorp, Inc. ("HUB"). Pursuant to Section 2.1 of the
Merger Agreement, subject to certain conditions, each shareholder of the
outstanding common stock of SJBD (the "SJBD Common Stock") has a right to
receive 1.26 shares of the common stock of HUB (the "HUB Common Stock") for each
share of SJBD Common Stock tendered. The terms and guidelines of the transaction
are more fully set forth in the Reorganization Agreement and the Merger
Agreement.
In connection with our opinion, we have: (i) analyzed certain internal financial
statements and other financial and operating data concerning SJBD prepared by
the management of SJBD; (ii) analyzed certain publicly available financial
statements, both audited and unaudited, and other information of SJBD and HUB,
including those included in SJBD's Annual Reports for the three years ended
December 31, 1998, HUB's Annual Reports for the three years ended December 31,
1998, HUB's Quarterly Reports for the periods ended June 30, 1998, September 30,
1998, and March 31, 1999, and SJBD's Quarterly Reports for the periods ended
June 30, 1998, September 30, 1998, and March 31, 1999; (iii) analyzed certain
financial projections of SJBD prepared by the management of SJBD; (iv) discussed
the past and current operations and financial condition of SJBD with senior
executives of SJBD; (v) reviewed the reported stock prices and trading activity
for HUB Common Stock; (vi) compared the financial performance of HUB Common
Stock and trading activity with that of certain other comparable publicly-traded
companies and their securities; (vii) reviewed and compared certain security
analysis reports of HUB's Common Stock prepared by various investment banking
firms; (viii) reviewed the financial terms, to the extent publicly available, of
certain comparable precedent transactions; (ix) reviewed the Merger Agreement;
and (x) performed such other analyses as deemed appropriate.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. We have not made an independent evaluation of the assets or liabilities
of SJBD, nor have we been furnished with any such appraisals. With respect to
financial forecasts, we have assumed that they have been reasonably prepared and
reflect the best currently available estimates and judgments or management of
SJBD as to the future financial performance of SJBD. We have assumed such
forecasts and projections will be realized in the amounts and at the times
contemplated thereby. With respect to HUB, we relied solely upon publicly
available data and we did not conduct discussions with the management of HUB
regarding HUB's financial condition, performance and prospects. We did not
conduct any independent evaluation or appraisal of the assets, liabilities or
business prospects of HUB, we were not furnished with any evaluations or
appraisals, and we did not review any individual credit files of HUB. We are not
experts in the evaluation of loan portfolios for the purpose of assessing the
adequacy of the allowance for losses with respect thereto and have assumed that
such allowances for each of the companies are in the aggregate, adequate to
cover such losses.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion.
Our opinion is limited to the fairness, from a financial point of view, to the
holders of SJBD Common Stock of the Merger Consideration to be received by the
holders of the SJBD Common Stock as stated in the Merger Agreement and does not
address SJBD's underlying business decision to undertake the Merger. Moreover,
this letter, and the opinion expressed herein, does not constitute a
recommendation to any shareholder as to any approval of the Merger or the Merger
Agreement. It is understood that this letter is for the information of the Board
of Directors of SJBD and may not be used for any other purpose without our prior
written consent, except that this opinion may be included in its entirety in any
filing made by SJBD with the Securities and Exchange Commission with respect to
the Merger.
Based on the foregoing and such other matters we have deemed relevant, we are of
the opinion, as of the date hereof, that the Merger Consideration is fair, from
a financial point of view, to the holders of SJBD Common Stock.
Respectfully submitted,
FIRST CAPITAL GROUP, L.L.C.
<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"),
Southern Jersey Bancorp of Delaware, Inc. ("SOJB") and Farmers and
Merchants National Bank ("FAM") (included as Appendix A to the Proxy
Statement). *
2(b) Stock Option Agreement, dated as of June 28, 1999, by and between HUB
and SOJB (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 Athey & Company, CPAs, P.A.
23(b) Consent of Belfint, Lyons & Schuman, P.A.
23(c) Consent of Arthur Andersen LLP.
23(d) Consent of First Capital Group, LLC.
23(e) Consent of Pitney, Hardin, Kipp & Szuch (included in Exhibits 5 and 8
hereto).
99(a) Form of Proxy Card
- -------------------------
* Included elsewhere in this registration statement.
** Incorporated by reference.
B. Report, Opinion or Appraisals
Form of Fairness Opinion of First Capital Group, LLC is included as
Appendix C 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"),
Southern Jersey Bancorp of Delaware, Inc. ("SOJB"), and Farmers and
Merchants National Bank ("FAM") (included as Appendix A to the Proxy
Statement). *
2(b) Stock Option Agreement, dated as of June 28, 1999, by and between HUB
and SOJB (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 Athey & Company, CPAs, P.A.
23(b) Consent of Belfint, Lyons & Schuman, P.A.
23(c) Consent of Arthur Andersen LLP.
23(d) Consent of First Capital Group, LLC.
23(e) Consent of Pitney, Hardin, Kipp & Szuch (included in Exhibits 5 and 8
hereto).
99(a) Form of 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 10, 1999
Hudson United Bancorp
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Re: Merger of Hudson United Bancorp. and Southern Jersey Bancorp
of Delaware, 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, Southern Jersey Bancorp of Delaware, Inc., and Farmers and Merchants
National Bank 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
Morristown, NJ 07962-1945
August 10, 1999
Hudson United Bancorp.
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Attn: Kenneth T. Neilson, Chairman, President and
Chief Executive Officer
Southern Jersey Bancorp of Delaware, Inc.
53 South Laurel Street
Bridgeton, New Jersey 08302
Attn: Clarence D. McCormick, Sr.
Chairman and Chief Executive Officer
Re: Merger of Hudson United Bancorp. and
Southern Jersey Bancorp of Delaware, Inc.
Gentlemen:
We have acted as counsel for 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
Southern Jersey Bancorp of Delaware, Inc. ("SJBDI") a Delaware 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, SJBDI
and Farmers and Merchants National Bank ("FAMNB"), a national bank which is a
wholly owned subsidiary of SJBDI.
Capitalized terms used but not defined herein shall have the
meanings specified 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 SJBDI dated August 9, 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 SJBDI in
connection with the Merger. Sections 361(a) and 1032.
3. SJBDI shareholders will not recognize any gain or loss for
federal income tax purposes upon the exchange in the Merger of shares of SJBDI
Common Stock solely for HUB Common Stock. Section 354(a).
4. SJBDI 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 SJBDI shareholder 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 SJBDI 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 SJBDI common stock surrendered in the exchange, reduced by the amount of any
cash received, if any, in the exchange, 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 SJBDI in connection with the Merger will include the period
during which their SJBDI 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
INDEPENDENT ACCOUNTANT'S 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 22, 1999 included in Southern Jersey Bancorp of Delaware,
Inc.'s Annual Report on Form 10-K and to all references to our firm included in
this Registration Statement.
ATHEY & COMPANY, CPA's, P.A.
Bridgeton, New Jersey
August 5, 1999
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement on Form S-4 of our
report dated March 3, 1999 included in Southern Jersey Bancorp of Delaware, Inc.
annual report on Form 10-K for the year ended December 31, 1998 and to all
references to our firm included in this registration statement.
BELFINT, LYONS & SHUMAN, P.A.
Wilmington, Delaware
August 5, 1999
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement on Form S-4 of our
report dated January 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 10, 1999
CONSENT OF FIRST CAPITAL GROUP, LLC
We hereby consent to the use of our firm's name in the Form S-4 Registration
Statement of Southern Jersey Bancorp of Delaware, Inc. relating to the proposed
merger with and into Hudson United Bancorp. We also consent to the inclusion of
our opinion letter as an Appendix to the Proxy Statement-Prospectus and to the
references to our opinion included in the Proxy Statement-Prospectus.
FIRST CAPITAL GROUP, LLC
GARY A. SIMANSON
By:-------------------------------
Gary A. Simanson
Managing Director
Date: August 10, 1999
SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
PROXY
FOR THE SPECIAL MEETING OF SHAREHOLDERS
September 16, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Ralph A. Cocove, Sr. and Julie A.
Hassler-Defrehn and each of them, as Proxy, each with full power of
substitution, to vote all of the stock SOUTHERN JERSEY BANCORP OF DELAWARE, INC.
standing in the undersigned's name at the Special Meeting of Shareholders of
SOUTHERN JERSEY BANCORP OF DELAWARE, INC., to be held at 164 West Broad Street,
Bridgeton, New Jersey 08302, on Thursday, September 16, 1999 at 10:00 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 the merger of Southern Jersey Bancorp of Delaware,
Inc. with and into Hudson United Bancorp.
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. MERGER of Southern Jersey Bancorp of Delaware, Inc. with and into Hudson
United Bancorp
/ / FOR the merger.
/ / AGAINST the merger:
/ / WITHHOLD AUTHORITY to vote for the merger
2. In their discretion, upon such other matters as may properly come before
the meeting.
Dated: ________________, 1999
___________________________
Signature
___________________________
Printed Name
___________________________
Signature
___________________________
Printed 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
