EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of January 26,
1999 ("Agreement"), is among HUBCO, Inc. ("HUBCO"), a New Jersey corporation and
registered bank holding company, Hudson United Bank (the "Bank"), a New Jersey
state-chartered commercial banking corporation and wholly-owned subsidiary of
HUBCO, Little Falls Bancorp, Inc., a New Jersey corporation and registered
savings and loan holding company ("LFB"), and Little Falls Bank, a
federally-chartered savings bank and wholly-owned subsidiary of LFB (the
"Association").
RECITALS
The respective Boards of Directors of HUBCO and LFB have each
determined that it is in the best interests of HUBCO and LFB and their
respective shareholders for HUBCO to acquire LFB by merging LFB with and into
HUBCO with HUBCO surviving and LFB shareholders receiving the consideration
hereinafter set forth. Immediately after the merger of LFB into HUBCO, the
Association shall be merged with and into the Bank with the Bank surviving.
The respective Boards of Directors of LFB, HUBCO, the Bank and
the Association have each duly adopted and approved this Agreement and the Board
of Directors of LFB has directed that it be submitted to LFB's shareholders for
approval.
As a condition for HUBCO to enter into this Agreement, HUBCO
has required that it receive an option on certain authorized but unissued shares
of LFB Common Stock (as hereinafter defined) and, simultaneously with the
execution of this Agreement, LFB is issuing an option to HUBCO (the "HUBCO Stock
Option") to purchase certain shares of the authorized and unissued LFB Common
Stock subject to the terms and conditions set forth in the Agreement governing
the HUBCO Stock Option.
NOW, THEREFORE, intending to be legally bound, the parties
hereto hereby agree as follows:
ARTICLE I - THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as hereafter defined), LFB shall be merged
with and into HUBCO (the "Merger") in accordance with the New Jersey Business
Corporation Act (the "NJBCA") and HUBCO shall be the surviving corporation (the
"Surviving Corporation").
1.2. Effect of the Merger. At the Effective Time, the
Surviving Corporation shall be considered the same business and corporate entity
as each of HUBCO and LFB and thereupon and thereafter, all the property, rights,
privileges, powers and franchises of each of HUBCO and LFB shall vest in the
Surviving Corporation and the Surviving Corporation shall be subject to and be
deemed to have assumed all of the debts, liabilities, obligations and duties of
each of HUBCO and LFB and shall have succeeded to all of each of their
relationships, as fully and to the same extent as if such property, rights,
privileges, powers, franchises, debts, liabilities,
obligations, duties and relationships had been originally acquired, incurred or
entered into by the Surviving Corporation. In addition, any reference to either
of HUBCO and LFB in any contract or document, whether executed or taking effect
before or after the Effective Time, shall be considered a reference to the
Surviving Corporation if not inconsistent with the other provisions of the
contract or document; and any pending action or other judicial proceeding to
which either of HUBCO or LFB is a party shall not be deemed to have abated or to
have discontinued by reason of the Merger, but may be prosecuted to final
judgment, order or decree in the same manner as if the Merger had not been made;
or the Surviving Corporation may be substituted as a party to such action or
proceeding, and any judgment, order or decree may be rendered for or against it
that might have been rendered for or against either of HUBCO or LFB if the
Merger had not occurred.
1.3. Certificate of Incorporation. As of the Effective Time,
the certificate of incorporation of HUBCO shall be the certificate of
incorporation of the Surviving Corporation until otherwise amended as provided
by law.
1.4. Bylaws. As of the Effective Time, the Bylaws of HUBCO
shall be the Bylaws of the Surviving Corporation until otherwise amended as
provided by law.
1.5. Directors and Officers. As of the Effective Time, the
directors and officers of HUBCO shall be the directors and officers of the
Surviving Corporation.
1.6 Closing, Closing Date, Determination Date and Effective
Time. Unless a different date, time and/or place are agreed to by the parties
hereto, the closing of the Merger (the "Closing") shall take place at 10:00
a.m., at the offices of Pitney, Hardin, Kipp & Szuch, 200 Campus Drive, Florham
Park, New Jersey, on a date determined by HUBCO on at least five business days
notice (the "Closing Notice") given to LFB, which date (the "Closing Date")
shall be not more than twenty (20) business days following the receipt of all
necessary regulatory, governmental and shareholder approvals and consents and
the expiration of all statutory waiting periods in respect thereof and the
satisfaction or waiver of all of the conditions to the consummation of the
Merger specified in Article VI hereof (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing). In
the Closing Notice, HUBCO shall specify the "Determination Date" for purposes of
determining the Median Pre-Closing Price (as hereinafter defined), which date
shall be the first date on which all bank regulatory approvals (and waivers, if
applicable) necessary for consummation of the Merger have been received
(disregarding any waiting period) and either party has notified the other in
writing that all such approvals (and waivers, if applicable) have been received.
Simultaneous with or immediately following the Closing, HUBCO and LFB shall
cause to be filed a certificate of merger, in form and substance satisfactory to
HUBCO and LFB, with the Secretary of State of the State of New Jersey (the
"Certificate of Merger"). The Certificate of Merger shall specify the "Effective
Time" of the Merger, which Effective Time shall be a date and time following the
Closing agreed to by HUBCO and LFB (which date and time the parties currently
anticipate will be the close of business on the Closing Date). In the event the
parties fail to specify the date and time in the Certificate of Merger, the
Merger shall become effective upon (and the "Effective Time" shall be) the time
of the filing of the Certificate of Merger.
1.7 The Bank Merger. Immediately following the Effective Time,
the Association shall be then merged with and into the Bank (the "Bank Merger")
in accordance with the provisions
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of the New Jersey Banking Act of 1948, as amended (the "Banking Act"). In the
Bank Merger, the Bank shall be the surviving bank (the "Surviving Bank"). Upon
the consummation of the Bank Merger, the separate existence of the Association
shall cease and the Surviving Bank shall be considered the same business and
corporate entity as each of the Association and the Bank and all of the
property, rights, privileges, powers and franchises of each of the Association
and the Bank shall vest in the Surviving Bank and the Surviving Bank shall be
deemed to have assumed all of the debts, liabilities, obligations and duties of
each of the Association and the Bank and shall have succeeded to all or each of
their relationships, fiduciary or otherwise, as fully and to the same extent as
if such property, rights, privileges, powers, franchises, debts, obligations,
duties and relationships had been originally acquired, incurred or entered into
by the Surviving Bank. Upon the consummation of the Bank Merger, the certificate
of incorporation and Bylaws of the Bank shall be the certificate of
incorporation and Bylaws of the Surviving Bank and the officers and directors of
the Bank shall be the officers and directors of the Surviving Bank. Following
the execution of this Agreement, the Association and the Bank shall execute and
deliver a merger agreement (the "Bank Merger Agreement"), both in form and
substance reasonably satisfactory to the parties hereto, substantially as set
forth in Exhibit 1.7 hereto, for delivery to the Commissioner of the New Jersey
Department of Banking and Insurance (the "Department"), the Federal Deposit
Insurance Corporation (the "FDIC"), and the Office of Thrift Supervision (the
"OTS") for approval of the Bank Merger.
1.8 Liquidation Account. The liquidation account established
by the Association pursuant to the plan of conversion adopted in connection with
its conversion from mutual to stock form shall, to the extent required by
applicable law, continue to be maintained by HUBCO after the Bank Merger for the
benefit of those persons and entities who were savings account holders of the
Association on the eligibility and supplemental eligibility record dates for
such conversion and who continue from time to time to have rights therein. If
acquired by the rules and regulations of the OTS, the Surviving Bank will amend
its certificate of incorporation to provide specifically for the continuation of
the liquidation account previously established by the Association.
ARTICLE II - CONVERSION OF LFB SHARES
2.1. Conversion of LFB Common Stock. Each share of common
stock, par value $0.10 per share, of LFB ("LFB 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 Ratio and Cash Election. Subject to the other
provisions of this Section 2.1, each share of LFB Common Stock issued and
outstanding immediately prior to the Effective Time (other than Excluded Shares,
as hereinafter defined) shall be converted at the Effective Time into (i) the
right to receive 0.65 shares (the "Exchange Ratio") of common stock, no par
value ("HUBCO Common Stock") of HUBCO, or (ii) the right to receive $20.64 in
cash, without interest (the "Per Share Cash Amount"), or (iii) the right to
receive a combination of shares of HUBCO Common Stock and cash determined in
accordance with subparagraph (d) of this Section 2.1; provided, however, that,
(i) in any event, if between the date of this Agreement and
the Effective Time the outstanding shares of HUBCO Common Stock shall have been
changed into a different number of
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shares or a different class, by reason of any stock dividend, stock split,
reclassification, recapitalization, combination or exchange of shares, the
Exchange Ratio, the Median Pre-Closing Price and related items shall be
correspondingly adjusted to reflect such stock dividend, stock split,
reclassification; and
(ii) If the Median Pre-Closing Price of HUBCO Common Stock is
$29.00 or less, the Exchange Ratio shall be increased, but not beyond 0.7000, to
a number (rounded to four decimals) equal to the quotient, the numerator of
which is $19.00 and the denominator of which is the Median Pre-Closing Price of
HUBCO Common Stock. If the Median Pre-Closing Price of HUBCO Common Stock is
$34.50 or more, the Exchange Ratio shall be decreased, but not beyond 0.6000, to
a number (rounded to four decimals) equal to the quotient, the numerator of
which is $22.3795 and the denominator of which is the Median Pre-Closing Price
of HUBCO Common Stock; and
(iii) The "Median Pre-Closing Price" shall be determined by
taking the price half-way between the Closing Prices left after discarding the 4
lowest and 4 highest Closing Prices in the 10 consecutive trading day period
which ends on (and includes) the Determination Date. The "Closing Price" shall
mean the closing price of HUBCO Common Stock as supplied by the NASDAQ Stock
Market and published in The Wall Street Journal. A "trading day" shall mean a
day for which a Closing Price is so supplied and published. (The NASDAQ Stock
Market, or such other national securities exchange on which HUBCO Common Stock
may be traded after the date hereof, is referred to herein as "NASDAQ").
After the Effective Time, all such shares of LFB Common Stock
shall no longer be outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each certificate previously evidencing any such
shares 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 LFB Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of LFB
Common Stock except as otherwise provided herein or by law. Such certificates
previously evidencing such shares of LFB Common Stock shall be exchanged for (i)
certificates evidencing shares of HUBCO Common Stock issued in accordance with
the allocation procedures of this Section 2.1 and/or (ii) cash payable in
accordance with the allocation procedures of this Section 2.1, in each case upon
the surrender of such certificates in accordance with the provisions of Section
2.2, without interest. No fractional shares of HUBCO Common Stock may be issued,
and, in lieu thereof, a cash payment shall be made pursuant to Section 2.2(e).
(b) Ratio of HUBCO Common Stock to Cash. Subject to Section
2.1(k), the number of shares of LFB Common Stock to be converted into the right
to receive cash in the Merger (the "Cash Election Number") shall be equal to 49%
(the "Cash Percentage") of the number of shares of LFB Common Stock outstanding
immediately prior to the Effective Time. Subject to Section 2.1(k), the number
of shares of LFB Common Stock to be converted into the right to receive HUBCO
Common Stock in the Merger (the "Stock Election Number") shall be equal to 51%
(the "Stock Percentage") of the number of shares of LFB Common Stock outstanding
immediately prior to the Effective Time.
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(c) Elections by Holders of Stock or Cash. Subject to the
allocation and election procedures set forth in this Section 2.1, each record
holder immediately prior to the Effective Time of shares of LFB Common Stock
will be entitled (i) to elect to receive cash for all of such shares (a "Cash
Election"), (ii) to elect to receive HUBCO Common Stock for all of such shares
(a "Stock Election"), or (iii) to indicate that such record holder has no
preference as to the receipt of cash or HUBCO Common Stock for such shares (a
"Non-Election"). All such elections shall be made on a form designed for that
purpose (a "Form of Election") and in form and substance satisfactory to HUBCO
and LFB. Holders of record of shares of LFB Common Stock who hold such shares as
nominees, trustees or in other representative capacities (a "Representative")
may submit multiple Forms of Election, provided that each such Form of Election
covers all the shares of LFB Common Stock held by each Representative for a
particular beneficial owner.
(d) Oversubscription for Cash Election. If the aggregate
number of shares of LFB Common Stock covered by Cash Elections (the "Cash
Election Shares") exceeds the Cash Election Number, all shares of LFB Common
Stock covered by Stock Elections (the "Stock Election Shares") and all shares of
LFB Common Stock covered by Non-Elections (the "Non-Election Shares") shall be
converted into the right to receive HUBCO Common Stock, and the Cash Election
Shares shall be converted into the right to receive HUBCO Common Stock and cash
in the following manner:
(i) the Exchange Agent (as hereinafter defined) will select
from among the holders of Cash Election Shares, by random selection, a
sufficient number of such holders ("Stock Designees") such that the
number of shares of LFB Common Stock held by the Stock Designees will,
when added to the number of Stock Election Shares and Non-Election
Shares, be equal as closely as practicable to the Stock Election
Number, and all such Shares of LFB Common Stock held by the Stock
Designees shall be converted into the right to receive HUBCO Common
Stock; and
(ii) the Cash Election Shares not held by Stock Designees
shall be converted into the right to receive cash.
(e) Oversubscription for Stock Election. If the aggregate
number of Stock Election Shares exceeds the Stock Election Number, all Cash
Election Shares and all Non-Election Shares shall be converted into the right to
receive cash, and all Stock Election Shares shall be converted into the right to
receive HUBCO Common Stock or the right to receive cash in the following manner:
(i) the Exchange Agent (as hereinafter defined) will select
from among the holders of Stock Election Shares, by random selection, a
sufficient number of such holders ("Cash Designees") such that the
number of shares of LFB Common Stock held by the Cash Designees will,
when added to the number of Cash Election Shares and Non-Election
Shares, be equal as closely as practicable to the Cash Election Number,
and all such Shares of LFB Common Stock held by the Cash Designees
shall be converted into the right to receive cash; and
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(ii) the Stock Election Shares not held by Cash Designees
shall be converted into the right to receive HUBCO Common Stock.
(f) Selection of Non-Election Shares If No Oversubscription.
In the event that neither paragraph (d) nor subparagraph (e) above is
applicable, all Cash Election Shares shall be converted into the right to
receive cash, all Stock Election Shares shall be converted into the right to
receive HUBCO Common Stock, and the Non-Election Shares shall be converted into
either the right to receive HUBCO Common Stock or the right to receive cash by
random selection by the Exchange Agent so that the Stock Election Number and the
Cash Election Number equal their respective percentages of the number of shares
of LFB Common Stock outstanding as closely as possible.
The random selection process to be used by the Exchange Agent
pursuant to paragraphs (e) and (f) of this Section 2.1 will consist of drawing
by lot or such other process (other than pro rata selection) as the Exchange
Agent deems equitable and necessary to effect the allocations described in such
paragraphs. A selection will be disregarded if, as a consequence, the Stock
Election Number or the Cash Election Number would be exceeded by more than 1,000
shares.
(g) Procedures for Holders' Elections. Elections shall be made
by holders of LFB Common Stock by mailing to the Exchange Agent a Form of
Election. To be effective, a Form of Election must be properly completed, signed
and submitted to the Exchange Agent by the holder and accompanied by the
certificates representing the shares of LFB Common Stock as to which the
election is being made (or properly completed, signed and submitted to the
Exchange Agent by an appropriate bank or trust company in the United States or a
member of a registered national securities exchange or the National Association
of Securities Dealers, Inc. (the "NASD")). HUBCO will have the discretion, which
it may delegate in whole or in part to the Exchange Agent, to determine whether
Forms of Election have been properly completed, signed and submitted and to
disregard immaterial defects in Forms of Election. The good faith decision of
HUBCO (or the Exchange Agent) in such matters shall be conclusive and binding,
provided that HUBCO (and the Exchange Agent) does not act unreasonably and shall
promptly notify LFB of its decision in writing. Neither HUBCO nor the Exchange
Agent will be under any obligation to, but HUBCO and the Exchange Agent may (if
they choose to do so), notify any person of any defect in a Form of Election
submitted to the Exchange Agent. The Exchange Agent shall also make all
computations contemplated by this Section 2.1 and all such computations shall be
conclusive and binding on the holders of LFB Common Stock, provided that the
Exchange Agent does not act unreasonably.
(h) Failure of Holder to Elect. For the purposes hereof, a
holder of LFB Common Stock who does not submit a Form of Election which is
received by the Exchange Agent prior to the Election Deadline (as hereinafter
defined) shall be deemed to have made a Non-Election. If HUBCO or the Exchange
Agent shall determine that any purported Cash Election or Stock Election was not
properly made, such purported Cash Election or Stock Election shall, unless
cured by the Election Deadline (as hereafter defined), be deemed to be of no
force and effect and the shareholder or Representative making such purported
Cash Election or Stock Election shall, for purposes hereof, be deemed to have
made a Non-Election.
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(i) Mailing of Election Forms to Holders and Deadline. HUBCO
and LFB shall each use its best efforts to mail the Form of Election to all
persons who are holders of record of LFB Common Stock on the record date for the
Stockholders Meeting (as defined in Section 5.7) and who become holders of LFB
Common Stock during the period between the record date for the Stockholders
Meeting and 10:00 a.m. New York time, on at least the date fifteen calendar days
prior to the anticipated Effective Time and to make the Form of Election
available to all persons who become holders of LFB Common Stock subsequent to
such day and no later than the close of business on the Election Deadline. A
Form of Election must be received by the Exchange Agent by the close of business
on the third business day prior to the Closing (the "Election Deadline") in
order to be effective. All elections will be irrevocable.
(j) Excluded Shares. Each share of LFB Common Stock held in
the treasury of LFB or any of LFB's wholly-owned subsidiaries and each share of
LFB Common Stock owned by HUBCO or any of HUBCO's wholly-owned subsidiaries
(other than shares held as trustee or in a fiduciary capacity and shares held as
collateral on or in lieu of a debt previously contracted) immediately prior to
the Effective Time ("Excluded Shares") shall be cancelled; provided, however,
that the LFB Common Stock held by the LFB Employee Stock Ownership Plan and
Trust (the "LFB ESOP") and the Little Falls Bank Management Stock Bonus Plan
(the "LFB MSBP") and the 1998 Directors Stock Compensation Plan and the 1997
Directors Stock Compensation Plan shall not be covered by this paragraph.
(k) Increase in Stock Election Number Due to Tax Opinion. If
the tax opinion referred to in Section 6.1(d) and to be delivered at the Closing
(The "Tax Opinion") cannot be rendered (as reasonably determined by Pitney,
Hardin, Kipp & Szuch and concurred in by Malizia, Spidi, Sloane & Fisch, P.C.)
as a result of the Merger potentially failing to satisfy continuity of interest
requirements under applicable federal income tax principles relating to
reorganizations under Section 368(a) of the Code (as hereafter defined in
Section 3.8), then the Stock Percentage shall be automatically increased and the
Cash Percentage shall be automatically decreased to the minimum extent necessary
to enable the Tax Opinion to be rendered.
2.2. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, HUBCO shall
deposit, or shall cause to be deposited, with a bank or trust company designated
by HUBCO, which may be Hudson United Bank, Trust Department (the "Exchange
Agent"), for the benefit of the holders of shares of LFB Common Stock, for
exchange in accordance with this Article II, through the Exchange Agent,
certificates evidencing shares of HUBCO Common Stock and cash in such amount
that the Exchange Agent possesses such number of shares of HUBCO Common Stock
and such amount of cash as are required to provide all of the consideration
required to be exchanged by HUBCO pursuant to the provisions of this Article II
(such certificates for shares of HUBCO Common Stock, together with any dividends
or distributions with respect thereto, and cash being hereinafter referred to as
the "Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the HUBCO Common Stock and cash out of the Exchange Fund
in accordance with Section 2.1. Except as contemplated by Section 2.2(f) hereof,
the Exchange Fund shall not be used for any other purpose.
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(b) Exchange Procedures. As soon as reasonably practicable
either before or after the Effective Time, HUBCO will instruct the Exchange
Agent to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time evidenced outstanding shares of LFB
Common Stock (the "Certificates"), (i) a letter of transmittal (which is
reasonably agreed to by HUBCO and LFB and shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as HUBCO may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates evidencing shares of HUBCO Common Stock or cash. Upon surrender
of a Certificate for cancellation to the Exchange Agent together with such
letter of transmittal, duly executed, and such other customary documents as may
be required pursuant to such instructions, the holder of such Certificate shall
be entitled to receive in exchange therefor (A) certificates evidencing that
number of whole shares of HUBCO Common Stock which such holder has the right to
receive in respect of the shares of LFB Common Stock formerly evidenced by such
Certificate in accordance with Section 2.1, (B) cash to which such holder is
entitled to receive in respect of the shares of LFB Common Stock formerly
evidenced by such Certificate in accordance with Section 2.1, (C) cash in lieu
of fractional shares of HUBCO Common Stock to which such holder may be entitled
pursuant to Section 2.2(e) and (D) any dividends or other distributions to which
such holder is entitled pursuant to Section 2.2(c), (the shares of HUBCO Common
Stock, dividends, distributions and cash described in clauses (A), (B), (C) and
(D) being collectively, the "Merger Consideration") and the Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of shares of LFB Common Stock which is not registered in the transfer
records of LFB, a certificate evidencing the proper number of shares of HUBCO
Common Stock and/or cash may be issued and/or paid in accordance with this
Article II to a transferee if the Certificate evidencing such shares of LFB
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 applicable type and amount of Merger Consideration.
(c) Distributions with Respect to Unexchanged Shares of HUBCO
Common Stock. No dividends or other distributions declared or made after the
Effective Time with respect to HUBCO Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of HUBCO Common Stock evidenced thereby, and no other part
of the Merger Consideration shall be paid to any such holder, until the holder
of such Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates evidencing shares of HUBCO Common Stock
issued in exchange therefor, without interest, (i) promptly, the amount of any
cash payable with respect to a fractional share of HUBCO Common Stock to which
such holder may have been entitled pursuant to Section 2.2(e) and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such shares of HUBCO Common Stock, and (ii) at
the appropriate payment date, the amount of dividends or other distributions,
with a record date after the Effective Time but prior to surrender and a payment
date occurring after surrender, payable with respect to such shares of HUBCO
Common Stock. No interest shall be paid on the Merger Consideration.
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(d) No Further Rights in LFB Common Stock. All shares of HUBCO
Common Stock issued and cash paid upon conversion of the shares of LFB 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 LFB Common
Stock.
(e) No Fractional Shares. No certificates or scrip evidencing
fractional shares of HUBCO Common Stock shall be issued upon the surrender for
exchange of Certificates and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of HUBCO. Cash shall
be paid in lieu of fractional shares of HUBCO Common Stock, based upon the
Median Pre-Closing Price of HUBCO Common Stock.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of LFB Common Stock for two
years after the Effective Time shall be delivered to HUBCO, upon demand, and any
holders of LFB Common Stock who have not theretofore complied with this Article
II shall thereafter look only to HUBCO for the Merger Consideration to which
they are entitled.
(g) No Liability. Neither HUBCO nor the Bank shall be liable
to any holder of shares of LFB Common Stock for any such shares of HUBCO Common
Stock or cash (or dividends or distributions with respect thereto) delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
(h) Withholding Rights. HUBCO shall be entitled to deduct and
withhold, or cause the Exchange Agent to deduct and withhold, from funds
provided by the holder or from the consideration otherwise payable pursuant to
this Agreement to any holder of LFB Common Stock, the minimum amounts (if any)
that HUBCO is required to deduct and withhold with respect to the making of such
payment under the Code (as defined in Section 3.8), or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by HUBCO,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of LFB Common Stock in respect of which such
deduction and withholding was made by HUBCO.
2.3. Stock Transfer Books. At the Effective Time, the stock
transfer books of LFB shall be closed and there shall be no further registration
of transfers of shares of LFB Common Stock thereafter on the records of LFB. On
or after the Effective Time, any Certificates presented to the Exchange Agent or
HUBCO for transfer shall be converted into the Merger Consideration.
2.4. LFB Stock Options. Other than the HUBCO Stock Option, all
options which may be exercised for issuance of LFB Common Stock (each, a "Stock
Option" and collectively the "Stock Options") are described in the LFB
Disclosure Schedule and are issued and outstanding pursuant to the LFB 1996
Stock Option Plan (the "LFB Stock Option Plan") and the agreements pursuant to
which such Stock Options were granted (each, an "Option Grant Agreement"). HUBCO
acknowledges and agrees to honor the provisions of the LFB Stock Option Plan and
the Option Grant Agreements, including those relating to vesting and conversion
in connection with a change in control of LFB. Each Stock Option outstanding at
the Effective Time (each, a "Continuing Stock Option") shall be converted into
an option to purchase HUBCO Common Stock, wherein (i) the right to purchase
shares of LFB Common Stock pursuant to the Continuing Stock Option shall be
converted into the right to purchase that same number of shares of HUBCO
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Common Stock multiplied by the Exchange Ratio, (ii) the option exercise price
per share of HUBCO Common Stock shall be the previous option exercise price per
share of the LFB Common Stock divided by the Exchange Ratio, and (iii) in all
other material respects the option shall be subject to the same terms and
conditions as governed the Continuing Stock Option on which it was based,
including the length of time within which the option may be exercised (which
shall not be extended except that the holder of a Stock Option who continues in
the service of HUBCO or a subsidiary of HUBCO shall not be deemed to have
terminated service for purposes of determining the Continuing Stock Option
exercise period) and for all Continuing Stock Options, such adjustments shall be
and are intended to be effected in a manner which is consistent with Section
424(a) of the Code (as defined in Section 3.8 hereof). Shares of HUBCO Common
Stock issuable upon exercise of Continuing Stock Options shall be covered by an
effective registration statement on Form S-8, and HUBCO shall use its reasonable
best efforts to file a registration statement on Form S-8 covering such shares
as soon as possible after the Effective Time.
2.5. HUBCO Common Stock. The shares of HUBCO Common Stock
outstanding or held in treasury immediately prior to the Effective Time shall
not be effected by the Merger but shall be the same number of shares of the
Surviving Corporation.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF LFB
References herein to "LFB 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 LFB to HUBCO.
LFB hereby represents and warrants to HUBCO as follows:
3.1. Corporate Organization.
(a) LFB is a corporation duly organized and validly
existing under the laws of the State of New Jersey.
LFB 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 LFB and the LFB Subsidiaries (as defined below), taken as
a whole. LFB is registered as a savings and loan holding company under the Home
Owners' Loan Act, as amended (the "HOLA").
(b) Each LFB Subsidiary and its jurisdiction of
incorporation is listed in the LFB Disclosure Schedule. For purposes of this
Agreement, the term "LFB Subsidiary" means any corporation, partnership, joint
venture or other legal entity in which LFB, directly or indirectly, owns at
least a 50% stock or other equity interest or for which LFB, 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 "LFB Subsidiary" shall include any entity which
was a LFB Subsidiary at any time during such period. The Association is a
federally chartered bank duly organized and validly existing in stock form under
the laws of the United States. All eligible accounts of depositors issued by the
Association are insured by the Savings Association Insurance Fund of the FDIC
(the "SAIF") or the Bank Insurance Fund of the
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FDIC ("BIF") to the fullest extent permitted by law. Each LFB 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 LFB and the LFB Subsidiaries, taken as a whole.
(c) The LFB Disclosure Schedule sets forth true and complete copies of the
Certificate of Incorporation or Charter and Bylaws, as in effect on the date
hereof, of LFB and each LFB Subsidiary. Except as set forth in Disclosure
Schedule 3.1(b), the Association and LFB 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 LFB
consists of 10,000,000 shares of LFB Common Stock and 5,000,000 shares of
preferred stock, $0.10 par value per share ("LFB Preferred Stock"). As of the
date hereof, there were 2,477,525 shares of LFB Common Stock issued and
outstanding and 564,225 treasury shares and no shares of LFB Preferred Stock
issued or outstanding. As of January 1, 1999, there were 247,161 shares of LFB
Common Stock issuable upon exercise of outstanding stock options. The LFB
Disclosure Schedule contains (i) a list of all Stock Options, their exercise
prices and expiration dates, and (ii) true and complete copies of the LFB 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 LFB Stock Option Plan and Option Grant Agreements pursuant to which such
Stock Options were granted. No Stock Option is exercisable more than 90 days
after the termination of employment except in the case of death or disability
when the Stock Option may be exercised for up to one year after the termination
of employment. All issued and outstanding shares of LFB Common Stock, and all
issued and outstanding shares of capital stock of each LFB Subsidiary, have been
duly authorized and validly issued, are fully paid, nonassessable and free of
preemptive rights and are free and clear of any liens, encumbrances, charges,
restrictions or rights of third parties imposed by LFB or any LFB Subsidiary.
Except for the Stock Options listed on the LFB Disclosure Schedule and the award
of 8,845 Plan Share Awards under the 1998 Directors Stock Compensation Plan, and
the 84,148 unvested shares under the 1998 Directors Stock Compensation Plan,
1997 Directors Stock Compensation Plan and the 1996 Management Stock Bonus Plan
for which shares are held in trust and the HUBCO Stock Option, neither LFB nor
the Association has granted nor is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the transfer, purchase, subscription or issuance of any shares of capital stock
of LFB or the Association or any securities representing the right to purchase,
subscribe or otherwise receive any shares of such capital stock or any
securities convertible into any such shares, and there are no agreements or
understandings with respect to voting of any such shares.
3.3. Authority; No Violation.
(a) Subject to the approval of this Agreement and the
transactions contemplated hereby by all applicable regulatory authorities and by
the shareholders of LFB, and
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except as set forth in the LFB Disclosure Schedule, LFB and the Association have
the full corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby in accordance with the terms
hereof. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
directors of LFB and the Association in accordance with their respective
Certificate of Incorporation and Bylaws and applicable laws and regulations.
Except for such approvals, no other corporate proceedings not otherwise
contemplated hereby on the part of LFB or the Association are necessary to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by LFB and the Association, and constitutes a
valid and binding obligation of each of LFB and the Association, enforceable
against LFB and the Association in accordance with its terms, except to the
extent that enforcement may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, conservatorship, receivership or other similar laws
now or hereafter in effect relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors of federally chartered
savings banks or their holding companies, (ii) general equitable principles, and
(iii) laws relating to the safety and soundness of insured depository
institutions and except that no representation is made as to the effect or
availability of equitable remedies or injunctive relief.
(b) Neither the execution and delivery of this
Agreement by LFB or the Association, nor the consummation by LFB or the
Association of the transactions contemplated hereby in accordance with the terms
hereof, or compliance by LFB or the Association with any of the terms or
provisions hereof, will (i) violate any provision of LFB's or the Association's
Certificate of Incorporation or Charter 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 LFB, the Association or any of their respective properties or
assets, or (iii) except as set forth in the LFB 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 LFB or the
Association under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which LFB or the Association is a party, or by which
they or any of their respective properties or assets may be bound or affected
except, with respect to (ii) and (iii) above, such as individually or in the
aggregate will not have a material adverse effect on the business, operations,
assets or financial condition of LFB and the LFB 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 OTS, the Department, the New
Jersey Department of Environmental Protection (the "DEP") (if required), the New
Jersey Secretary of State, the Securities and Exchange Commission (the "SEC"),
and the shareholders of LFB, 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 LFB or the Association in connection with (x) the
execution and delivery by LFB of this Agreement and (y) the consummation by LFB
of the Merger, and the consummation by LFB and the Association of the other
transactions contemplated hereby, except (i) such as are listed in the LFB
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 LFB and the LFB Subsidiaries taken as a
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whole or prevent or materially delay the consummation of the transactions
contemplated hereby. To the best of LFB's knowledge, no fact or condition exists
which LFB has reason to believe will prevent it and the Association from
obtaining the aforementioned consents and approvals.
3.4. Financial Statements.
(a) The LFB Disclosure Schedule sets forth copies of the consolidated
statements of financial condition of LFB as of December 31, 1996 and 1997, and
the related consolidated statements of income, changes in stockholders' equity
and of cash flows for the periods ended December 31, in each of the three fiscal
years 1995 through 1997, in each case accompanied by the audit report of Radics
& Co., LLC, independent public accountants with respect to LFB ("R&C"), and the
unaudited consolidated statement of condition of LFB as of September 30, 1998
and the related unaudited consolidated statements of income and cash flows for
the nine months ended September 30, 1998 and 1997, as reported in LFB's
Quarterly Report on Form 10-Q, filed with the SEC under the Securities Exchange
Act of 1934, as amended ("1934 Act") (collectively, the "LFB Financial
Statements"). The LFB Financial Statements (including the related notes) have
been prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied during the periods involved (except as may be
indicated therein or in the notes thereto), and fairly present the consolidated
financial condition of LFB 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 LFB for the respective periods set forth
therein.
(b) The books and records of LFB and each of its Subsidiaries are being
maintained in material compliance with applicable legal and accounting
requirements.
(c) Except as and to the extent reflected, disclosed or reserved against in
the LFB Financial Statements (including the notes thereto), as of September 30,
1998, neither LFB nor any LFB Subsidiary had any liabilities, whether absolute,
accrued, contingent or otherwise, material to the business, operations, assets
or financial condition of LFB and the LFB Subsidiaries, taken as a whole which
were required by GAAP (consistently applied) to be disclosed in LFB's
consolidated statement of condition as of September 30, 1998 or the notes
thereto, except to the extent of the 1998 Directors Stock Compensation Plan and
any payments to be made upon benefits acceleration upon a change in control
under various benefit plans. Since September 30, 1998, neither LFB nor any LFB
Subsidiary has incurred any liabilities except in the ordinary course of
business and consistent with prudent business practice, except as related to the
transactions contemplated by this Agreement or except as set forth in the LFB
Disclosure Schedule.
3.5. Broker's and Other Fees. Except for FinPro, Inc. ("FinPro"), neither
LFB nor any of its Subsidiaries nor any of their respective directors or
officers has employed any broker or finder or incurred any liability for any
broker's or finder's fees or commissions in connection with any of the
transactions contemplated by this Agreement. The agreement with FinPro is set
forth in the LFB Disclosure Schedule. Other than pursuant to the agreement with
FinPro, 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 LFB
or any its Subsidiaries.
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3.6. Absence of Certain Changes or Events.
(a) Except as disclosed in the LFB Disclosure Schedule, there has not been
any LFB Material Adverse Change (as hereinafter defined) since September 30,
1998 and to the best of LFB's knowledge, no fact or condition exists which LFB
believes will cause such an LFB Material Adverse Change in the future. "LFB
Material Adverse Change" means any change which is material and adverse to the
consolidated financial condition, results of operations, business or assets of
LFB and the LFB Subsidiaries taken as a whole, other than (i) a change in the
value of the respective investment and loan portfolios of LFB and the LFB
Subsidiaries as the result of a change in interest rates generally, (ii) a
change occurring after the date hereof in any federal or state law, rule or
regulation or in GAAP, which change affects savings institutions generally,
(iii) reasonable expenses incurred in connection with this Agreement and the
transactions contemplated hereby, (iv) payments to executive officers or other
employees of LFB or the Association pursuant to agreements or arrangements with
such persons, which agreements or arrangements are included in the LFB
Disclosure Schedule, or (v) actions or omissions of LFB or any LFB Subsidiary
either specifically permitted by this Agreement or taken with the prior written
consent of HUBCO in contemplation of the transactions contemplated hereby
(including without limitation any actions taken by LFB or the Association
pursuant to Section 5.15 of this Agreement).
(b) Neither LFB nor any LFB Subsidiary has taken or permitted any of the
actions set forth in Section 5.2 hereof between September 30, 1998 and the date
hereof and, except for execution of this Agreement, and the other documents
contemplated hereby, LFB and each LFB Subsidiary has conducted their respective
businesses only in the ordinary course, consistent with past practice.
3.7. Legal Proceedings. Except as disclosed in the LFB Disclosure Schedule,
and except for ordinary routine litigation incidental to the business of LFB and
the LFB Subsidiaries, neither LFB nor any LFB Subsidiary is a party to any, and
there are no pending or, to the best of LFB's knowledge, threatened legal,
administrative, arbitral or other proceedings, claims, actions or governmental
investigations of any nature against LFB or any LFB Subsidiary which, if decided
adversely to LFB or any LFB Subsidiary, are reasonably likely to have a material
adverse effect on the business, operations, assets or financial condition of LFB
and the LFB Subsidiaries taken as a whole. Except as disclosed in the LFB
Disclosure Schedule, neither LFB nor any LFB Subsidiary is a party to any order,
judgment or decree entered in any lawsuit or proceeding which is material to LFB
or such LFB Subsidiary.
3.8. Taxes and Tax Returns.
(a) LFB and each LFB Subsidiary has duly filed (and until the Effective
Time will so file) all returns, declarations, reports, information returns and
statements ("Returns") required to be filed by it on or before the Effective
Time in respect of any federal, state and local taxes (including withholding
taxes, penalties or other payments required) and has duly paid (and until the
Effective Time will so pay) all such taxes due and payable, other than taxes or
other charges which are being contested in good faith (and disclosed to HUBCO in
writing) or against which reserves have been established. LFB and each LFB
Subsidiary has established (and until the Effective Time will establish) on its
books and records reserves that are adequate for the payment of
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all federal, state and local taxes not yet due and payable, but are incurred in
respect of LFB or such LFB Subsidiary through such date. None of the federal or
state income tax returns of LFB or any LFB Subsidiary have been examined by the
Internal Revenue Service (the "IRS") or the New Jersey Division of Taxation
within the past six years. To the best knowledge of LFB, except as disclosed in
the LFB 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 LFB or any LFB Subsidiary,
nor has LFB or any LFB 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 LFB Disclosure Schedule, neither LFB nor any
LFB 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 LFB or such LFB Subsidiary (nor does LFB have any knowledge
that the IRS has proposed any such adjustment or change of accounting method),
or (iv) has filed a consent pursuant to Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply.
(c) Neither LFB nor any LFB Subsidiary has any tax loss carryforwards.
3.9. Employee Benefit Plans.
(a) Except as set forth on the LFB Disclosure Schedule, neither LFB nor any
LFB Subsidiary maintains or contributes to any "employee pension benefit plan"
(the "LFB 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 "LFB 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 LFB nor any LFB Subsidiary has, since September 2, 1974, contributed to
any "Multiemployer Plan," within the meaning of Section 3(37) of ERISA.
(b) LFB has previously delivered to HUBCO, and included in the LFB
Disclosure Schedule, a complete and accurate copy of each of the following
including any amendments thereto with respect to each of the LFB Pension Plans
and LFB 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 and
financial statement, if any; and (v) most recent annual report on Form 5500. The
Little Falls Bancorp, Inc. Employee Stock Ownership Plan (the "LFB ESOP") owns
approximately 9.8% of the outstanding LFB Common Stock; the LFB ESOP owes
approximately $2.2 million to LFB which is expected to be fully discharged by
payment to HUBCO from the cash merger consideration payable to the LFB ESOP upon
consummation of the Merger.
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(c) Except as disclosed in the LFB Disclosure Schedule, the present value
of all accrued benefits, both vested and non-vested, under each of the LFB
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 LFB 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 LFB's
knowledge, the actuarial assumptions then utilized for such plans were
reasonable and appropriate as of the last valuation date and reflect then
current market conditions.
(d) During the last six years, the Pension Benefit Guaranty Corporation
("PBGC") has not asserted any claim for liability against LFB or any LFB
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 LFB Pension Plan have been
paid. All contributions required to be made to each LFB 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 LFB which have not been paid
have been properly recorded on the books of LFB .
(f) Except as disclosed in the LFB Disclosure Schedule, each of the LFB
Pension Plans, LFB Welfare Plans and each other employee benefit plan and
arrangement identified on the LFB 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 LFB Disclosure Schedule, if LFB maintains any LFB Pension Plan,
LFB 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 LFB is
not aware of any fact or circumstance which would disqualify any plan.
(g) To the best knowledge of LFB, 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 LFB Welfare Plan or LFB Pension Plan that would
result in any material tax or penalty for LFB or any LFB Subsidiary.
(h) No LFB 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 4043(b) of ERISA, with
respect to any LFB Pension Plan.
(i) Except as disclosed in the LFB Disclosure Schedule, no "accumulated
funding deficiency," within the meaning of Section 412 of the Code, has been
incurred with respect to any LFB Pension Plan.
(j) There are no material pending, or, to the best knowledge of LFB,
material threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of, or against any of the LFB Pension Plans or the LFB
Welfare Plans, any trusts created thereunder or any other plan or arrangement
other than as identified in the LFB Disclosure Schedule.
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(k) Except as disclosed in the LFB Disclosure Schedule, no LFB Pension Plan
or LFB 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 LFB Pension Plan.
(l) Except with respect to customary health, life and disability benefits
or as disclosed in the LFB Disclosure Schedule, there are no unfunded benefit
obligations which are not accounted for by reserves shown on the LFB Financial
Statements and established in accordance with GAAP.
(m) With respect to each LFB Pension Plan and LFB Welfare Plan that is
funded wholly or partially through an insurance policy, there will be no
liability of LFB or any LFB 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 LFB Disclosure Schedule, and (ii) as
set forth in the LFB Disclosure Schedule, or as expressly agreed to by HUBCO in
writing either pursuant to this Agreement or otherwise, or as required by law,
the consummation of the transactions contemplated by this Agreement will not (x)
entitle any current or former employee of LFB or any LFB 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 LFB Pension Plan or LFB
Welfare Plan.
(o) Except for the LFB Pension Plans and the LFB Welfare Plans, and except
as set forth on the LFB Disclosure Schedule, LFB has no deferred compensation
agreements, understandings or obligations for payments or benefits to any
current or former director, officer or employee of LFB or any LFB Subsidiary or
any predecessor of any thereof. The LFB 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 LFB Disclosure Schedule, LFB 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 LFB 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 LFB `s knowledge,
neither LFB nor any LFB Pension Plan or LFB 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 LFB Disclosure Schedule, LFB does not
maintain any retirement plan or retiree medical plan or arrangement for
directors. The LFB
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Disclosure Schedule sets forth the complete documentation and actuarial
evaluation of any such plan.
(r) On or before the date hereof, LFB has caused the Little Falls Savings
Bank Directors Consultation and Retirement Plan (the "Director Retirement Plan")
to be terminated at the Effective Time and has obtained in writing the consent
of every participant to such termination and such consents are part of the LFB
Disclosure Schedule. LFB has also caused the [Post-Retirement Health Plan] to be
terminated at the Effective Time and each participant therein has consented to
such termination and the consent is contained in the Disclosure Schedule.
3.10. Reports.
(a) The LFB Disclosure Schedule lists, and as to item (i) below LFB has
previously delivered to HUBCO a complete copy of, each (i) final registration
statement, prospectus, annual, quarterly or current report and definitive proxy
statement filed by LFB since January 1, 1996 pursuant to the Securities Act of
1933, as amended ("1933 Act"), or the 1934 Act and (ii) communication (other
than general advertising materials, dividend checks, and press releases) mailed
by LFB to its shareholders as a class since January 1, 1996, and each such
communication, as of its date, complied in all material respects with all
applicable statutes, rules and regulations and did not contain any untrue
statement of a material fact or omit to state any material fact required to
bestated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading; provided
that information as of a later date shall be deemed to modify information as of
an earlier date.
(b) Since January 1, 1996, (i) LFB has filed all reports that it was
required to file with the SEC under the 1934 Act, and (ii) LFB and the
Association each has duly filed all material forms, reports and documents which
it was required to file with each agency charged with regulating any aspect of
its business, in each case in form which was correct in all material respects,
and, subject to permission from such regulatory authorities, LFB promptly will
deliver or make available to HUBCO accurate and complete copies of such reports.
As of their respective dates, each such form, report, or document, and each such
final registration statement, prospectus, annual, quarterly or current report,
definitive proxy statement or communication, complied in all material respects
with all applicable statutes, rules and regulations and did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading;
provided that information contained in any such document as of a later date
shall be deemed to modify information as of an earlier date. The LFB Disclosure
Schedule lists the dates of all examinations of LFB or the Association conducted
by either the FDIC or the OTS since January 1, 1996 and the dates of any
responses thereto submitted by LFB or the Association.
3.11. LFB and Association Information. The information relating to LFB and
the Association, this Agreement, and the transactions contemplated hereby
(except for information relating solely to HUBCO) to be contained in the Proxy
Statement-Prospectus (as defined in Section 5.6(a) hereof) to be delivered to
shareholders of LFB in connection with the solicitation of their approval of the
Merger, as of the date the Proxy Statement-Prospectus is mailed to shareholders
of LFB, 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
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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 LFB
Disclosure Schedule, LFB and each LFB 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 LFB or such LFB 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 LFB and the LFB Subsidiaries taken as a whole) and LFB 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 LFB
Disclosure Schedule, (i) neither LFB nor any LFB 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 LFB or any LFB
Subsidiary to any officer, employee, director or consultant thereof. The LFB
Disclosure Schedule sets forth true and correct copies of all severance or
employment agreements with officers, directors, employees, agents or consultants
to which LFB or any LFB Subsidiary is a party.
(b) Except as disclosed in the LFB Disclosure Schedule and except for loan
commitments, loan agreements and loan instruments entered into or issued by the
Association in the ordinary course of business, (i) as of the date of this
Agreement, neither LFB nor any LFB 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 LFB and the LFB Subsidiaries taken
as a whole, (ii) no commitment, agreement or other instrument to which LFB or
any LFB Subsidiary is a party or by which either of them is bound limits the
freedom of LFB or any LFB Subsidiary to compete in any line of business or with
any person, and (iii) neither LFB nor any LFB Subsidiary is a party to any
collective bargaining agreement.
(c) Except as disclosed in the LFB Disclosure Schedule, neither LFB nor any
LFB Subsidiary or, to the best knowledge of LFB, any other party thereto, is in
default in any material respect under any material lease, contract, mortgage,
promissory note, deed of trust, loan or other commitment (except those under
which the Association is or will be the creditor) or arrangement, except for
defaults which individually or in the aggregate would not have a material
adverse effect on the business, operations, assets or financial condition of LFB
and the LFB Subsidiaries, taken as a whole.
19
3.14. Properties and Insurance.
(a) Except as set forth in the LFB Disclosure Schedule, LFB or a LFB
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 LFB's consolidated balance sheet as of September 30,
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 September 30, 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 LFB and the LFB Subsidiaries taken as a whole and (iv) with respect
to owned real property, title imperfections noted in title reports delivered to
HUBCO prior to the date hereof. Except as affected by the transactions
contemplated hereby, LFB or one or more of its Subsidiaries as lessees have the
right under valid and subsisting leases to occupy, use, possess and control all
real property leased by LFB and such Subsidiaries in all material respects as
presently occupied, used, possessed and controlled by LFB and its Subsidiaries.
(b) Except as set forth in the LFB Disclosure Schedule, the business
operations and all insurable properties and assets of LFB and each LFB
Subsidiary are insured for their benefit against all risks which, in the
reasonable judgment of the management of LFB, 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 LFB adequate for the business engaged in by LFB
and the LFB Subsidiaries. As of the date hereof, neither LFB nor any LFB
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 LFB Disclosure Schedule sets
forth in summary form a list of all insurance policies of LFB and the LFB
Subsidiaries.
3.15. Minute Books. The minute books of LFB and the LFB 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 LFB Disclosure
Schedule:
(a) Neither LFB nor any LFB Subsidiary has received any written notice,
citation, claim, assessment, proposed assessment or demand for abatement
alleging that LFB or such LFB 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
20
the business, operations, assets or financial condition of LFB and the LFB
Subsidiaries taken as a whole. LFB 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 LFB or any LFB Subsidiary, as REO or
otherwise, or owned or controlled by LFB or any LFB Subsidiary as a trustee or
fiduciary (collectively, "Properties"), in any manner that violates any
presently existing federal, state or local law or regulation governing or
pertaining to such substances and materials, the violation of which would have a
material adverse effect on the business, operations, assets or financial
condition of LFB and the LFB Subsidiaries, taken as a whole. Except as described
in the LFB Disclosure Schedule, none of the Properties is located outside the
State of New Jersey.
(b) LFB 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 LFB and the LFB Subsidiaries taken as a whole.
(c) To the best of LFB's knowledge, LFB, each LFB 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) Except as disclosed in the LFB Disclosure Schedule, to the knowledge of
LFB, 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 LFB or
any LFB Subsidiary.
3.17. Reserves. As of September 30, 1998, the allowance for loan losses in
the LFB Financial Statements was adequate pursuant to GAAP (consistently
applied), and the methodology used to compute the loan loss reserve complies in
all material respects with GAAP (consistently applied) and all applicable
policies of the OTS. As of September 30, 1998, the reserve for REO properties
(or if no reserve, the carrying value of REO properties) in the LFB Financial
Statements was adequate pursuant to GAAP (consistently applied), and the
methodology used to compute the reserve for REO properties (or if no reserve,
the carrying value of REO properties) complies in all material respects with
GAAP (consistently applied) and all applicable policies of the OTS.
3.18. No Parachute Payments. No officer, director, employee or agent (or
former officer, director, employee or agent) of LFB or any LFB 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 LFB, a LFB Subsidiary, HUBCO or
any HUBCO Subsidiary which if paid or provided would constitute an "excess
parachute payment", as defined in Section 280G of the Code or regulations
promulgated thereunder.
21
3.19. Agreements with Bank Regulators. Except as disclosed in the LFB
Disclosure Schedule, neither LFB nor any LFB Subsidiary is a party to any
agreement or memorandum of understanding with, or a party to any commitment
letter, board resolution submitted to a regulatory authority or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, any court, governmental authority or
other regulatory or administrative agency or commission, domestic or foreign
("Governmental Entity") which restricts materially the conduct of its business,
or in any manner relates to its capital adequacy, its credit or reserve policies
or its management, except for those the existence of which has been disclosed in
writing to HUBCO by LFB prior to the date of this Agreement, nor has LFB been
advised by any Governmental Entity that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar submission, except as disclosed
in writing to HUBCO by LFB prior to the date of this Agreement. Neither LFB nor
any LFB Subsidiary is required by Section 32 of the Federal Deposit Insurance
Act to give prior notice to a Federal banking agency of the proposed addition of
an individual to its board of directors or the employment of an individual as a
senior executive officer, except as disclosed in writing to HUBCO by LFB prior
to the date of this Agreement.
3.20. Year 2000 Compliance. LFB and the LFB 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 LFB and the LFB Subsidiaries to be substantially Year 2000
compliant on or before the end of 1999 and, except as set forth in the LFB
Disclosure Schedule, LFB does not expect the future cost of addressing such
issues to be material.
3.21. Reorganization. As of the date hereof, after reviewing the terms of
this Agreement with LFB's attorneys, LFB does not have any reason to believe
that the Merger will fail to qualify as a reorganization under Section 368(a) of
the Code.
3.22. Disclosure. No representation or warranty contained in Article III of
this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein not misleading.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF HUBCO
References herein to the "HUBCO Disclosure Schedule" shall mean all of the
disclosure schedules required by this Article IV, dated as of the date hereof
and referenced to the specific sections and subsections of Article IV of this
Agreement, which have been delivered on the date hereof by HUBCO to LFB. HUBCO
hereby represents and warrants to LFB as follows:
4.1. Corporate Organization.
(a) HUBCO is a corporation duly organized and validly existing and in good
standing under the laws of the State of New Jersey. HUBCO has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
22
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of HUBCO and the HUBCO Subsidiaries
(defined below), taken as a whole. HUBCO is registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended (the "BHCA").
(b) Each HUBCO Subsidiary is listed in the HUBCO Disclosure Schedule. For
purposes of this Agreement, the term "HUBCO Subsidiary" means any corporation,
partnership, joint venture or other legal entity in which HUBCO directly or
indirectly, owns at least a 50% stock or other equity interest or for which
HUBCO, directly or indirectly, acts as a general partner provided that to the
extent that any representation or warranty set forth herein covers a period of
time prior to the date of this Agreement, the term "HUBCO Subsidiary" shall
include any entity which was an HUBCO Subsidiary at any time during such period.
Each HUBCO Subsidiary is duly organized and validly existing under the laws of
the jurisdiction of its incorporation. The Bank is a state-chartered commercial
banking corporation duly organized and validly existing under the laws of the
State of New Jersey. Lafayette American Bank ("Lafayette") is duly organized and
validly existing under the laws of the State of Connecticut. All eligible
accounts of depositors issued by the Bank and Lafayette are insured by BIF to
the fullest extent permitted by law. Each HUBCO Subsidiary has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have a
material adverse effect on the business, operations, assets or financial
condition of HUBCO and the HUBCO Subsidiaries, taken as a whole. The HUBCO
Disclosure Schedule sets forth true and complete copies of the Certificate of
Incorporation and Bylaws of HUBCO as in effect on the date hereof.
4.2. Capitalization. The authorized capital stock of HUBCO consists of
53,045,000 common shares, no par value ("HUBCO Common Stock"), and 10,300,000
shares of preferred stock ("HUBCO Authorized Preferred Stock"). As of December
31, 1998, there were 40,411,521 shares of HUBCO Common Stock issued and
outstanding, and 221,683 shares of treasury stock, and 500 shares of HUBCO
Authorized Preferred Stock outstanding all of which were designated Series B, no
par value, Convertible Preferred Stock. Except as described in the HUBCO
Disclosure Schedule, there are no shares of HUBCO Common Stock issuable upon the
exercise of outstanding stock options or otherwise. All issued and outstanding
shares of HUBCO Common Stock and HUBCO Authorized Preferred Stock, and all
issued and outstanding shares of capital stock of HUBCO's Subsidiaries, have
been duly authorized and validly issued, are fully paid, nonassessable and free
of preemptive rights, and are free and clear of all liens, encumbrances,
charges, restrictions or rights of third parties. All of the outstanding shares
of capital stock of the HUBCO Subsidiaries are owned by HUBCO free and clear of
any liens, encumbrances, charges, restrictions or rights of third parties.
Except as described in the HUBCO Disclosure Schedule, neither HUBCO nor any
HUBCO Subsidiary has granted or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the transfer, purchase or issuance of any shares of capital stock of HUBCO or
any HUBCO Subsidiary or any securities representing the right to purchase,
subscribe or otherwise receive any shares of such capital stock or any
securities convertible into any such shares, and there are no agreements or
understandings with respect to voting of any such shares.
23
4.3. Authority; No Violation.
(a) Subject to the receipt of all necessary governmental approvals, HUBCO
has full corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby in accordance with the terms
hereof. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of HUBCO in accordance with its Certificate of Incorporation
and applicable laws and regulations. Except for such approvals, no other
corporate proceedings on the part of HUBCO are necessary to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by HUBCO and constitutes a valid and binding obligation of HUBCO,
enforceable against HUBCO in accordance with its terms, except to the extent
that enforcement may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, conservatorship, receivership or other similar laws now or hereafter
in effect relating to or affecting the enforcement of creditors' rights
generally or the rights of creditors of bank holding companies, (ii) general
equitable principles, and (iii) laws relating to the safety and soundness of
insured depository institutions and except that no representation is made as to
the effect or availability of equitable remedies or injunctive relief.
(b) Neither the execution or delivery of this Agreement by HUBCO, nor the
consummation by HUBCO of the transactions contemplated hereby in accordance with
the terms hereof, or compliance by HUBCO with any of the terms or provisions
hereof will (i) violate any provision of the Certificate of Incorporation or
Bylaws of HUBCO, (ii) assuming that the consents and approvals set forth below
are duly obtained, violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to HUBCO, any HUBCO
Subsidiary, or any of their respective properties or assets, or (iii) violate,
conflict with, result in a breach of any provision of, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of, accelerate the performance
required by, or result in the creation of any lien, security interest, charge or
other encumbrance upon any of the properties or assets of HUBCO or any HUBCO
Subsidiary under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which HUBCO is a party, or by which it or any of
their properties or assets may be bound or affected, except, with respect to
(ii) and (iii) above, such as individually or in the aggregate will not have a
material adverse effect on the business, operation, assets or financial
condition of HUBCO and the HUBCO Subsidiaries, taken as a whole, and which will
not prevent or materially delay the consummation of the transactions
contemplated hereby. Except for consents and approvals of or filings or
registrations with or notices to the FDIC, the FRB, the OTS, the SEC, the
Department, or the Secretary of State of New Jersey, and the possible need under
the NASDAQ rules to obtain HUBCO shareholder approval, no consents or approvals
of or filings or registrations with or notices to any third party or any public
body or authority are necessary on behalf of HUBCO in connection with (x) the
execution and delivery by HUBCO of this Agreement, and (y) the consummation by
HUBCO of the Merger and the other transactions contemplated hereby, except such
as are listed in the HUBCO Disclosure Schedule or in the aggregate will not (if
not obtained) have a material adverse effect on the business, operation, assets
or financial condition of HUBCO and the HUBCO Subsidiaries, taken as a whole. To
the best of HUBCO's knowledge, no fact or condition exists which HUBCO has
reason to believe will prevent it from obtaining the aforementioned consents and
approvals.
24
4.4. Financial Statements.
(a) The HUBCO Disclosure Schedule sets forth copies of the consolidated
statements of financial condition of HUBCO as of December 31, 1996 and 1997, and
the related consolidated statements of income, changes in stockholders' equity
and of cash flows for the periods ended December 31, in each of the three fiscal
years 1995 through 1997, in each case accompanied by the audit report of Arthur
Andersen LLP ("Arthur Andersen"), independent public accountants with respect to
HUBCO and the unaudited consolidated statement of condition of HUBCO as of
September 30, 1998 and the related unaudited consolidated statements of income
and cash flows for the nine months ended September 30, 1998 and 1997, as
reported in HUBCO's Quarterly Report on Form 10-Q, filed with the SEC under the
1934 Act (collectively, the "HUBCO Financial Statements"). The HUBCO Financial
Statements (including the related notes) have been prepared in accordance with
GAAP consistently applied during the periods involved (except as may be
indicated therein or in the notes thereto), and fairly present the consolidated
financial position of HUBCO as of the respective dates set forth therein, and
the related consolidated statements of income, changes in stockholders' equity
and of cash flows (including the related notes, where applicable) fairly present
the consolidated results of operations, changes in stockholders' equity and cash
flows of HUBCO for the respective fiscal periods set forth therein.
(b) The books and records of HUBCO and the HUBCO Subsidiaries are being
maintained in material compliance with applicable legal and accounting
requirements, and reflect only actual transactions.
(c) Except as and to the extent reflected, disclosed or reserved against in
the HUBCO Financial Statements (including the notes thereto), as of September
30, 1998 neither HUBCO nor any of the HUBCO Subsidiaries had any obligation or
liability, whether absolute, accrued, contingent or otherwise, material to the
business, operations, assets or financial condition of HUBCO or any of the HUBCO
Subsidiaries which were required by GAAP (consistently applied) to be disclosed
in HUBCO's consolidated statement of condition as of September 30, 1998 or the
notes thereto. Except for the transactions contemplated by this Agreement, and
the other proposed acquisitions by HUBCO reflected in any press release issued
or Form 8-K filed by HUBCO with the SEC since September 30, 1998, neither HUBCO
nor any HUBCO Subsidiary has incurred any liabilities since September 30, 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 HUBCO nor any of its directors or
officers has employed any broker or finder or incurred any liability for any
broker's or finder's fees or commissions in connection with any of the
transactions contemplated by this Agreement.
4.6. Absence of Certain Changes or Events. There has not been any HUBCO
Material Adverse Change since September 30, 1998 and to the best of HUBCO's
knowledge, no facts or condition exists which HUBCO believes will cause a HUBCO
Material Adverse Change in the future. "HUBCO Material Adverse Change" means any
change which is material and adverse to the consolidated financial condition,
results of operations, business or assets of HUBCO and the HUBCO Subsidiaries
taken as a whole, other than (i) a change in the value of the respective
investment and loan portfolios of HUBCO and the HUBCO Subsidiaries as the result
of a change in interest rates generally, (ii) a change occurring after the date
hereof in any
25
federal or state law, rule or regulation or in GAAP, which change affects
banking institutions generally, (iii) reasonable expenses incurred in connection
with this Agreement and the transactions contemplated hereby, (iv) changes
resulting from acquisitions by HUBCO or any HUBCO Subsidiary pending on the date
hereof and known to LFB, other than changes resulting from facts not disclosed
to, or otherwise known by, LFB on or prior to the date hereof, or (v) the entry,
after the date hereof, by HUBCO or any HUBCO Subsidiary into an agreement to
acquire another entity.
4.7 Legal Proceedings. Except as disclosed in the HUBCO Disclosure
Schedule, and except for ordinary routine litigation incidental to the business
of HUBCO or its Subsidiaries, neither HUBCO nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of HUBCO's knowledge,
threatened legal, administrative, arbitral or other proceedings, claims, actions
or governmental investigations of any nature against HUBCO or any of its
Subsidiaries which, if decided adversely to HUBCO or its Subsidiaries, are
reasonably likely to have a material adverse effect on the business, operations,
assets or financial condition of HUBCO or its Subsidiaries, taken as a whole.
Except as disclosed in the HUBCO Disclosure Schedule, neither HUBCO nor any of
its Subsidiaries is a party to any order, judgment or decree entered in any
lawsuit or proceeding which is material to HUBCO or its Subsidiaries.
4.8 Reports. Since January 1, 1996, HUBCO has filed all reports that it was
required to file with the SEC under the 1934 Act, all of which complied in all
material respects with all applicable requirements of the 1934 Act and the rules
and regulations adopted thereunder. As of their respective dates, each such
report and each registration statement, proxy statement, form or other document
filed by HUBCO with the SEC, including without limitation, any financial
statements or schedules included therein, did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date. Since January 1, 1996, HUBCO and each HUBCO Subsidiary has duly
filed all material forms, reports and documents which they were required to file
with each agency charged with regulating any aspect of their business.
4.9 HUBCO Information. The information relating to HUBCO and its
Subsidiaries (including, without limitation, information regarding other
transactions which HUBCO is required to disclose), this Agreement and the
transactions contemplated hereby in the Registration Statement and Proxy
Statement-Prospectus (as defined in Section 5.6(a) hereof), as of the date of
the mailing of the Proxy Statement-Prospectus, and up to and including the date
of the meeting of stockholders of LFB to which such Proxy Statement-Prospectus
relates, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement shall comply as to form in all
material respects with the provisions of the 1933 Act, the 1934 Act and the
rules and regulations promulgated thereunder.
4.10 Compliance With Applicable Law. Except as set forth in the HUBCO
Disclosure Schedule, each of HUBCO and HUBCO's Subsidiaries holds all material
licenses, franchises, permits and authorizations necessary for the lawful
conduct of its business, and has
26
complied with and is not in default in any respect under any applicable law,
statute, order, rule, regulation, policy and/or guideline of any federal, state
or local governmental authority relating to HUBCO or HUBCO's Subsidiaries
(including without limitation consumer, community and fair lending laws) (other
than where such default or noncompliance will not result in a material adverse
effect on the business, operations, assets or financial condition of HUBCO and
HUBCO's Subsidiaries taken as a whole) and HUBCO has not received notice of
violation of, and does not know of any violations of, any of the above.
4.11 Funding and Capital Adequacy. At the Effective Time, after giving pro
forma effect to the Merger and any other acquisition which HUBCO or its
Subsidiaries have agreed to consummate, HUBCO will be deemed "well capitalized"
under prompt corrective action regulatory capital requirements.
4.12 HUBCO Common Stock. As of the date hereof, HUBCO has available and
reserved shares of HUBCO Common Stock sufficient for issuance pursuant to the
Merger and upon the exercise of Stock Options subsequent thereto. The HUBCO
Common Stock to be issued hereunder pursuant to the Merger, and upon exercise of
the Stock Options, when so issued, will be duly authorized and validly issued,
fully paid, nonassessable, free of preemptive rights and free and clear of all
liens, encumbrances or restrictions created by or through HUBCO, with no
personal liability attaching to the ownership thereof. The HUBCO Common Stock to
be issued hereunder pursuant to the Merger, and upon exercise of the Stock
Options, when so issued, will be registered under the 1933 Act and issued in
accordance with all applicable state and federal laws, rules and regulations,
and will be approved or listed for trading on NASDAQ.
4.13 Agreements with Bank Regulators. Neither HUBCO nor any HUBCO
Subsidiary is a party to any agreement or memorandum of understanding with, or a
party to any commitment letter, board resolution submitted to a regulatory
authority or similar undertaking to, or is subject to any order or directive by,
or is a recipient of any extraordinary supervisory letter from, any Government
Entity which restricts materially the conduct of its business, or in any manner
relates to its capital adequacy, its credit or reserve policies or its
management, except for those the existence of which has been disclosed in
writing to LFB by HUBCO prior to the date of this Agreement, nor has HUBCO been
advised by any Governmental Entity that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar submission, except as disclosed
in writing to LFB by HUBCO prior to the date of this Agreement. Neither HUBCO
nor any HUBCO Subsidiary is required by Section 32 of the Federal Deposit
Insurance Act to give prior notice to a Federal banking agency of the proposed
addition of an individual to its board of directors or the employment of an
individual as a senior executive officer, except as disclosed in writing to LFB
by HUBCO prior to the date of this Agreement.
4.14 Taxes and Tax Returns.
(a) HUBCO and HUBCO's subsidiaries have duly filed (and until the Effective
Time will so file) all Returns required to be filed by them in respect of any
federal, state and local taxes (including withholding taxes, penalties or other
payments required) and have duly paid (and until the Effective Time will so pay)
all such taxes due and payable, other than taxes or
27
other charges which are being contested in good faith (and disclosed to LFB in
writing). HUBCO and HUBCO's subsidiaries have established on their books and
records reserves that are adequate for the payment of all federal, state and
local taxes not yet due and payable, but are incurred in respect of HUBCO
through such date. The HUBCO Disclosure Schedule identifies the federal income
tax returns of HUBCO and its Subsidiaries which have been examined by the IRS
within the past six years. No deficiencies were asserted as a result of such
examinations which have not been resolved and paid in full. The HUBCO Disclosure
Schedule identifies the applicable state income tax returns of HUBCO and its
Subsidiaries which have been examined by the applicable authorities within the
past six years. No deficiencies were asserted as a result of such examinations
which have not been resolved and paid in full. To the best knowledge of HUBCO,
there are no audits or other administrative or court proceedings presently
pending nor any other disputes pending with respect to, or claims asserted for,
taxes or assessments upon HUBCO or its Subsidiaries, nor has HUBCO or its
Subsidiaries given any currently outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
taxes or Returns.
(b) Except as set forth in the HUBCO Disclosure Schedule, neither HUBCO nor
any Subsidiary of HUBCO (i) has requested any extension of time within which to
file any Return which Return has not since been filed, (ii) is a party to any
agreement providing for the allocation or sharing of taxes, (iii) is required to
include in income any adjustment pursuant to Section 481(a) of the Code, by
reason of a voluntary change in accounting method initiated by HUBCO or any of
its Subsidiaries (nor does HUBCO have any knowledge that the IRS has proposed
any such adjustment or change of accounting method) or (iv) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
4.15 Employee Benefit Plans.
(a) HUBCO and its Subsidiaries maintain or contribute to certain "employee
pension benefit plans" (the "HUBCO Pension Plans"), as such term is defined in
Section 3(2)(A) of ERISA, and "employee welfare benefit plans" (the "HUBCO
Welfare Plans"), as such term is defined in Section 3(1) of ERISA. Since
September 2, 1974, neither HUBCO nor its subsidiaries have contributed to any
"Multiemployer Plan", as such term is defined in Section 3(37) of ERISA.
(b) HUBCO is not aware of any fact or circumstance which would disqualify
any HUBCO Pension Plan or HUBCO Welfare Plan that could not be retroactively
corrected (in accordance with the procedures of the IRS).
(c) The present value of all accrued benefits under each of the HUBCO
Pension Plans subject to Title IV of ERISA, based upon the actuarial assumptions
used for purposes of the most recent actuarial valuation prepared by such HUBCO
Pension Plan's actuary, did not exceed the then current value of the assets of
such plans allocable to such accrued benefits.
(d) During the last six years, the PBGC has not asserted any claim for
liability against HUBCO or any of its subsidiaries which has not been paid in
full.
(e) All premiums (and interest charges and penalties for late payment, if
applicable) due to the PBGC with respect to each HUBCO Pension Plan have been
paid. All
28
contributions required to be made to each HUBCO Pension Plan under the terms
thereof, ERISA or other applicable law have been timely made, and all amounts
properly accrued to date as liabilities of HUBCO which have not been paid have
been properly recorded on the books of HUBCO.
(f) No "accumulated funding deficiency", within the meaning of Section 412
of the Code, has been incurred with respect to any of the HUBCO Pension Plans.
(g) There are no pending or, to the best knowledge of HUBCO, threatened or
anticipated material claims (other than routine claims for benefits) by, on
behalf of or against any of the HUBCO Pension Plans or the HUBCO Welfare Plans,
any trusts created thereunder or any other plan or arrangement identified in the
HUBCO Disclosure Schedule.
(h) Except with respect to customary health, life and disability benefits
or as disclosed in the HUBCO Disclosure Schedule, HUBCO has no unfunded benefit
obligations which are not accounted for by reserves shown on the financial
statements and established under GAAP or otherwise noted on such financial
statements.
4.16 Contracts. Except as disclosed in the HUBCO Disclosure Schedule,
neither HUBCO nor any of its Subsidiaries, or to the best knowledge of HUBCO,
any other party thereto, is in default in any material respect under any
material lease, contract, mortgage, promissory note, deed of trust, loan or
other commitment (except those under which a banking subsidiary of HUBCO is or
will be the creditor) or arrangement, except for defaults which individually or
in the aggregate would not have a material adverse effect on the business,
operations, assets or financial condition of HUBCO and its subsidiaries, taken
as a whole.
4.17 Properties and Insurance.
(a) HUBCO and its Subsidiaries have good and, as to owned real property,
marketable title to all material assets and properties, whether real or
personal, tangible or intangible, reflected in HUBCO's consolidated balance
sheet as of December 31, 1997, or owned and acquired subsequent thereto (except
to the extent that such assets and properties have been disposed of for fair
value in the ordinary course of business since December 31, 1997), subject to no
encumbrances, liens, mortgages, security interests or pledges, except (i) those
items that secure liabilities that are reflected in said balance sheet or the
notes thereto or that secure liabilities incurred in the ordinary course of
business after the date of such balance sheet, (ii) statutory liens for amounts
not yet delinquent or which are being contested in good faith, (iii) such
encumbrances, liens, mortgages, security interests, pledges and title
imperfections that are not in the aggregate material to the business,
operations, assets, and financial condition of HUBCO and its subsidiaries taken
as a whole and (iv) with respect to owned real property, title imperfections
noted in title reports. Except as disclosed in the HUBCO Disclosure Schedule,
HUBCO and its Subsidiaries as lessees have the right under valid and subsisting
leases to occupy, use, possess and control all property leased by HUBCO or its
Subsidiaries in all material respects as presently occupied, used, possessed and
controlled by HUBCO and its Subsidiaries.
(b) The business operations and all insurable properties and assets of
HUBCO and its Subsidiaries are insured for their benefit against all risks
which, in the reasonable judgment of the management of HUBCO, should be insured
against, in each case under policies or
29
bonds issued by insurers of recognized responsibility, in such amounts with such
deductibles and against such risks and losses as are in the opinion of the
management of HUBCO adequate for the business engaged in by HUBCO and its
Subsidiaries. As of the date hereof, neither HUBCO nor any of its Subsidiaries
has received any notice of cancellation or notice of a material amendment of any
such insurance policy or bond or is in default under any such policy or bond, no
coverage thereunder is being disputed and all material claims thereunder have
been filed in a timely fashion.
4.18. Environmental Matters. Except as disclosed in the HUBCO Disclosure
Schedule, neither HUBCO nor any of its Subsidiaries has received any written
notice, citation, claim, assessment, proposed assessment or demand for abatement
alleging that HUBCO or any of its Subsidiaries (either directly or as a
successor-in-interest in connection with the enforcement of remedies to realize
the value of properties serving as collateral for outstanding loans) is
responsible for the correction or cleanup of any condition resulting from the
violation of any law, ordinance or other governmental regulation regarding
environmental matters which correction or cleanup would be material to the
business, operations, assets or financial condition of HUBCO and its
Subsidiaries taken as a whole. Except as disclosed in the HUBCO Disclosure
Schedule, HUBCO has no knowledge that any toxic or hazardous substances or
materials have been emitted, generated, disposed of or stored on any property
currently owned or leased by HUBCO or any of its subsidiaries in any manner that
violates or, after the lapse of time is reasonably likely to violate, any
presently existing federal, state or local law or regulation governing or
pertaining to such substances and materials, the violation of which would have a
material adverse effect on the business, operations, assets or financial
condition of HUBCO and its Subsidiaries, taken as a whole.
4.19 Reserves. As of September 30, 1998, the allowance for possible loan
losses in the HUBCO Financial Statements was adequate based upon all factors
required to be considered by HUBCO at that time in determining the amount of
such allowance. The methodology used to compute the allowance for possible loan
losses complies in all material respects with all applicable FDIC and New Jersey
Department of Banking policies. As of September 30, 1998, the valuation
allowance for OREO properties in the HUBCO Financial Statements was adequate
based upon all factors required to be considered by HUBCO at that time in
determining the amount of such allowance.
4.20. Year 2000 Compliance. HUBCO and the HUBCO Subsidiaries have taken all
reasonable steps necessary to address the software, accounting and record
keeping issues raised in order for the data processing systems used in the
business conducted by HUBCO and the HUBCO Subsidiaries to be substantially Year
2000 compliant on or before the end of 1999 and HUBCO does not expect the future
cost of addressing such issues to be material.
4.21 Reorganization. As of the date hereof, after reviewing the terms of
this Agreement, with HUBCO's attorneys, HUBCO does not have any reason to
believe that the Merger will fail to as a reorganization under Section 368(a) of
the Code.
4.22 Disclosure. No representation or warranty contained in Article IV of
this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein not misleading.
30
ARTICLE V - COVENANTS OF THE PARTIES
5.1. Conduct of the Business of LFB. During the period from the date of
this Agreement to the Effective Time, LFB and the Association shall, and shall
cause each LFB Subsidiary to, conduct their respective businesses only in the
ordinary course and consistent with past practice, except for transactions
permitted hereunder or with the prior written consent of HUBCO, which consent
will not be unreasonably withheld, provided, however, that the Association may
in its sole discretion cause the 1998 Directors Stock Compensation Plan to
purchase up to 8,845 shares of LFB Common Stock for delivery to Plan
participants, pursuant to the terms of the Plan. Each of LFB and the Association
also shall use its reasonable best efforts to (i) preserve its business
organization and that of the LFB Subsidiaries intact, (ii) keep available to
itself and the LFB Subsidiaries the present services of their respective
employees, and (iii) preserve for itself and HUBCO the goodwill of its customers
and those of the LFB Subsidiaries and others with whom business relationships
exist.
5.2. Negative Covenants. From the date hereof to the Effective Time, except
as otherwise approved by HUBCO in writing, or as set forth in the LFB Disclosure
Schedule, or as permitted or required by this Agreement, neither LFB nor the
Association will:
(a) change any provision of its Certificate of Incorporation or any similar
governing documents;
(b) change any provision of its Bylaws without the consent of HUBCO which
consent shall not be unreasonably withheld;
(c) change the number of shares of its authorized or issued capital stock
(other than upon exercise of stock options or warrants described on the LFB
Disclosure Schedule in accordance with the terms thereof) or issue or grant any
option, warrant, call, commitment, subscription, right to purchase or agreement
of any character relating to its authorized or issued capital stock, or any
securities convertible into shares of such stock, or split, combine or
reclassify any shares of its capital stock, or declare, set aside or pay any
dividend, or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock; provided, however, that
from the date hereof to the Effective Time, LFB may declare, set aside or pay
its regular dividends on the LFB Common Stock in a quarterly amount equal to
$0.06 per share, with the dividend payment dates to be coordinated with HUBCO,
it being the intention of the parties that the shareholders of LFB receive
dividends for any particular calendar quarter on either the LFB Common Stock or
the HUBCO Common Stock acquired in exchange therefor pursuant to the terms of
this Agreement but not both; provided, further, that nothing contained herein
shall be deemed to affect the ability of the Association to pay dividends on its
capital stock to LFB;
(d) grant any severance or termination pay (other than pursuant to policies
or contracts of LFB in effect on the date hereof and disclosed to HUBCO in the
LFB 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 LFB
Disclosure Schedule;
31
(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 LFB or the Association;
(f) make any capital expenditures in excess of $50,000 in the aggregate,
other than pursuant to binding commitments existing on the date hereof,
expenditures necessary to maintain existing assets in good repair and
expenditures described in business plans or budgets previously furnished to
HUBCO, except as set forth in Section 5.2 of the LFB Disclosure Schedule;
(g) file any applications or make any contract with respect to branching or
site location or relocation;
(h) agree to acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity or make any new
investments in securities other than investments in government, municipal or
agency bonds having a maturity of less than five years;
(i) make any material change in its accounting methods or practices, other
than changes required in accordance with generally accepted accounting
principles or regulatory authorities;
(j) take any action that would result in any of its representations and
warranties contained in Article III of this Agreement not being true and correct
in any material respect at the Effective Time or that would cause any of its
conditions to Closing not to be satisfied;
(k) without first conferring with HUBCO, make or commit to make any new
loan or other extension of credit in an amount of $500,000 or more, renew for a
period in excess of one year any existing loan or other extension of credit in
an amount of $500,000 or more, or increase by $500,000 or more the aggregate
credit outstanding to any borrower or group of affiliated borrowers except such
loan initiations, renewals or increases that are committed as of the date of
this Agreement and identified on the LFB 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, LFB and
the Association shall not, directly or indirectly, encourage or solicit or hold
discussions or negotiations with, or provide any information to, any person,
entity or group (other than HUBCO) concerning any merger or sale of shares of
capital stock or sale of substantial assets or liabilities not in the ordinary
course of business, or similar transactions involving LFB or the Association (an
"Acquisition Transaction"). Notwithstanding the foregoing, LFB may enter into
discussions or negotiations or provide information in connection with an
unsolicited possible Acquisition Transaction if the Board of Directors of LFB,
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. LFB shall promptly communicate to HUBCO
the terms of any proposal, whether written or oral, which it may receive in
respect of any such Acquisition
32
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 LFB and HUBCO will cause one or more of its
designated representatives to confer with representatives of the other party on
a monthly or more frequent basis regarding its business, operations, properties,
assets and financial condition and matters relating to the completion of the
transactions contemplated herein. On a monthly basis, LFB agrees to provide
HUBCO, and HUBCO agrees to provide LFB, 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), LFB
will deliver to HUBCO and HUBCO will deliver to LFB 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, LFB will deliver to HUBCO and HUBCO will deliver to LFB 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) LFB and the Association shall permit HUBCO and its representatives, and
HUBCO shall permit, and cause each HUBCO Subsidiary to permit, LFB and its
representatives, reasonable access to their respective properties, and shall
disclose and make available to HUBCO and its representatives, or LFB 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 (excluding information related to merger matters), organizational
documents, Bylaws, material contracts and agreements, filings with any
regulatory authority, accountants' work papers, litigation files, plans
affecting employees, and any other business activities or prospects in which
HUBCO and its representatives or LFB and its representatives may have a
reasonable interest. Neither party shall be required to provide access to or to
disclose information where such access or disclosure would violate or prejudice
the rights of any customer, would contravene any law, rule, regulation, order or
judgment or would waive any privilege. The parties will use their reasonable
best efforts to obtain waivers of any such restriction (other than waivers of
the attorney-client privilege) and in any event make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. Notwithstanding the foregoing, LFB acknowledges that
HUBCO may be involved in discussions concerning other potential acquisitions and
HUBCO shall not be obligated to disclose such information to LFB except as such
information is disclosed to HUBCO's shareholders generally.
(b) All information furnished by the parties hereto previously in
connection with transactions contemplated by this Agreement or pursuant hereto
shall be used solely for the purpose of evaluating the Merger contemplated
hereby and shall be treated as the sole property of the party delivering the
information until consummation of the Merger contemplated hereby and, if such
Merger shall not occur, each party and each party's advisors shall return to the
other party all documents or other materials containing, reflecting or referring
to such information, will not retain any copies of such information, shall use
its reasonable best efforts to keep confidential all such
33
information, and shall not directly or indirectly use such information for any
competitive or other commercial purposes. In the event that the Merger
contemplated hereby does not occur, all documents, notes and other writings
prepared by a party hereto or its advisors based on information furnished by the
other party shall be promptly destroyed. The obligation to keep such information
confidential shall continue for five years from the date the proposed Merger is
abandoned but shall not apply to (i) any information which (A) the party
receiving the information can establish by convincing evidence was already in
its possession prior to the disclosure thereof to it by the other party; (B) was
then generally known to the public; (C) became known to the public through no
fault of the party receiving such information; or (D) was disclosed to the party
receiving such information by a third party not bound by an obligation of
confidentiality; or (ii) disclosures pursuant to a legal requirement or in
accordance with an order of a court of competent jurisdiction.
5.6. Regulatory Matters.
(a) For the purposes of holding the Shareholders Meeting (as such term is
defined in Section 5.7 hereof), and qualifying under applicable federal and
state securities laws the HUBCO Common Stock to be issued to LFB shareholders in
connection with the Merger, the parties hereto shall cooperate in the
preparation and filing by HUBCO with the SEC of a Registration Statement
including a combined proxy statement and prospectus satisfying all applicable
requirements of applicable state and federal laws, including the 1933 Act, the
1934 Act and applicable state securities laws and the rules and regulations
thereunder (such proxy statement and prospectus in the form mailed by LFB and
HUBCO to the LFB shareholders together with any and all amendments or
supplements thereto, being herein referred to as the "Proxy
Statement-Prospectus" and the various documents to be filed by HUBCO under the
1933 Act with the SEC to register the HUBCO Common Stock for sale, including the
Proxy Statement-Prospectus, are referred to herein as the "Registration
Statement").
(b) HUBCO shall furnish LFB with such information concerning HUBCO and its
Subsidiaries (including, without limitation, information regarding other
transactions which HUBCO is required to disclose) as is necessary in order to
cause the Proxy Statement-Prospectus, insofar as it relates to such
corporations, to comply with Section 5.6(a) hereof. HUBCO agrees promptly to
advise LFB if at any time prior to the Shareholders' Meeting any information
provided by HUBCO in the Proxy Statement-Prospectus becomes incorrect or
incomplete in any material respect and promptly to provide LFB with the
information needed to correct such inaccuracy or omission. HUBCO shall promptly
furnish LFB with such supplemental information as may be necessary in order to
cause the Proxy Statement-Prospectus, insofar as it relates to HUBCO and the
HUBCO Subsidiaries, to comply with Section 5.6(a) after the mailing thereof to
LFB shareholders.
(c) LFB shall furnish HUBCO with such information concerning LFB as is
necessary in order to cause the Proxy Statement-Prospectus, insofar as it
relates to LFB, to comply with Section 5.6(a) hereof. LFB agrees promptly to
advise HUBCO if at any time prior to the Shareholders' Meeting, any information
provided by LFB in the Proxy Statement-Prospectus becomes incorrect or
incomplete in any material respect and promptly to provide HUBCO with the
information needed to correct such inaccuracy or omission. LFB shall promptly
furnish HUBCO with such supplemental information as may be necessary in order to
cause the Proxy Statement-Prospectus, insofar as it relates to LFB and the
Association to comply with Section 5.6(a) after the mailing thereof to LFB
shareholders.
34
(d) HUBCO shall as promptly as practicable make such filings as are
necessary in connection with the offering of the HUBCO Common Stock with
applicable state securities agencies and shall use all reasonable efforts to
qualify the offering of such stock under applicable state securities laws at the
earliest practicable date. LFB shall promptly furnish HUBCO with such
information regarding the LFB shareholders as HUBCO requires to enable it to
determine what filings are required hereunder. LFB authorizes HUBCO to utilize
in such filings the information concerning LFB and the Association provided to
HUBCO in connection with, or contained in, the Proxy Statement-Prospectus. HUBCO
shall furnish LFB's counsel with copies of all such filings and keep LFB advised
of the status thereof. HUBCO and LFB shall as promptly as practicable file the
Registration Statement containing the Proxy Statement-Prospectus with the SEC,
and each of HUBCO and LFB shall promptly notify the other of all communications,
oral or written, with the SEC concerning the Registration Statement and the
Proxy Statement-Prospectus.
(e) HUBCO shall cause the HUBCO Common Stock issuable pursuant to the
Merger to be listed on NASDAQ at the Effective Time. HUBCO shall cause the HUBCO
Common Stock which shall be issuable pursuant to exercise of Stock Options to be
accepted for listing on NASDAQ when issued.
(f) The parties hereto will cooperate with each other and use their
reasonable best efforts to prepare all necessary documentation, to effect all
necessary filings and to obtain all necessary permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary to
consummate the transactions contemplated by this Agreement as soon as possible,
including, without limitation, those required by the FDIC, the FRB, the OTS, the
Department, the SEC and (if required) the DEP. Without limiting the foregoing,
the parties shall use reasonable business efforts to file for approval or waiver
by the appropriate bank regulatory agencies within 45 days after the date
hereof. The parties shall each have the right to review in advance (and shall do
so promptly) all filings with, including all information relating to the other,
as the case may be, and any of their respective subsidiaries, which appears in
any filing made with, or written material submitted to, any third party or
Governmental Entity in connection with the transactions contemplated by this
Agreement.
(g) Each of the parties will promptly furnish each other with copies of
written communications received by them or any of their respective subsidiaries
from, or delivered by any of the foregoing to, any Governmental Entity in
respect of the transactions contemplated hereby.
(h) LFB acknowledges that HUBCO is in or may be in the process of acquiring
other banks and financial institutions and that in connection with such
acquisitions, information concerning LFB may be required to be included in the
registration statements, if any, for the sale of securities of HUBCO or in SEC
reports in connection with such acquisitions. HUBCO shall provide LFB and its
counsel with copies of such registration statements at the time of filing. LFB
agrees to provide HUBCO with any information, certificates, documents or other
materials about LFB as are reasonably necessary to be included in such other SEC
reports or registration statements, including registration statements which may
be filed by HUBCO prior to the Effective Time. LFB shall use its reasonable
efforts to cause its attorneys and accountants to provide HUBCO and any
underwriters for HUBCO with any consents, comfort letters, opinion letters,
reports or information which are necessary to complete the registration
statements and
36
applications for any such acquisition or issuance of securities. HUBCO shall
reimburse LFB for reasonable expenses thus incurred by LFB should this
transaction be terminated for any reason. HUBCO shall not file with the SEC any
registration statement or amendment thereto or supplement thereof containing
information regarding LFB unless LFB 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, LFB shall
cooperate with HUBCO to reasonably conform LFB's policies and procedures
regarding applicable regulatory matters to those of HUBCO, as HUBCO may
reasonably identify to LFB from time to time, provided, however, that
implementation of such conforming actions may at LFB's discretion be delayed
until the time period following receipt of shareholder and all regulatory
approvals, as provided at Section 5.15.
5.7. Approval of Shareholders. LFB will (i) take all steps necessary duly
to call, give notice of, convene and hold a meeting of the shareholders of LFB
(the "Shareholders Meeting") for the purpose of securing the approval of
shareholders of this Agreement, (ii) subject to the qualification set forth in
Section 5.3 hereof and the right not to make a recommendation or to withdraw a
recommendation if (x) its investment banker withdraws its fairness opinion prior
to the Shareholders' Meeting or (y) LFB'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 LFB the approval of this Agreement and the transactions
contemplated hereby and use its reasonable best efforts to obtain, as promptly
as practicable, such approval, and (iii) cooperate and consult with HUBCO with
respect to each of the foregoing matters.
5.8. Further Assurances.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use its reasonable best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to satisfy the conditions to
Closing and to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, using reasonable efforts to lift
or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
by this Agreement and using its reasonable best efforts to prevent the breach of
any representation, warranty, covenant or agreement of such party contained or
referred to in this Agreement and to promptly remedy the same. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and directors of
each party to this Agreement shall take all such necessary action. Nothing in
this section shall be construed to require any party to participate in any
threatened or actual legal, administrative or other proceedings (other than
proceedings, actions or investigations to which it is a party or subject or
threatened to be made a party or subject) in connection with consummation of the
transactions contemplated by this Agreement unless such party shall consent in
advance and in writing to such participation and the other party agrees to
reimburse and indemnify such party for and against any and all costs and damages
related thereto if the Merger is not consummated.
36
(b) HUBCO agrees that from the date hereof to the Effective Time, except as
otherwise approved by LFB in writing or as permitted or required by this
Agreement, HUBCO will use reasonable business efforts to maintain and preserve
intact its business organization, properties, leases, employees and advantageous
business relationships, and HUBCO will not, nor will it permit any HUBCO
Subsidiary to, take any action: (i) that would result in any of its
representations and warranties contained in Article IV of this Agreement not
being true and correct in any material respect at, or prior to, the Effective
Time, or (ii) that would cause any of its conditions to Closing not to be
satisfied, or (iii) that would constitute a breach or default of its obligations
under this Agreement.
(c) HUBCO, the Bank, LFB and the Association will use reasonable efforts to
cause the Merger to occur on or before June 30, 1999.
5.9. Public Announcements. HUBCO and LFB shall cooperate with each other in
the development and distribution of all news releases and other public filings
and disclosures with respect to this Agreement or the Merger transactions
contemplated hereby, and HUBCO and LFB agree that unless approved mutually by
them in advance, they will not issue any press release or written statement for
general circulation relating primarily to the transactions contemplated hereby,
except as may be otherwise required by law or regulation upon the advice of
counsel.
5.10. Failure to Fulfill Conditions. In the event that HUBCO or LFB
determines that a material condition to its obligation to consummate the
transactions contemplated hereby cannot be fulfilled on or prior to September
30, 1999 (the "Cutoff Date") and that it will not waive that condition, it will
promptly notify the other party. Except for any acquisition or merger
discussions HUBCO may enter into with other parties, LFB and HUBCO will promptly
inform the other of any facts applicable to LFB or HUBCO, respectively, or their
respective directors or officers, that would be likely to prevent or materially
delay approval of the Merger by any Governmental Entity or which would otherwise
prevent or materially delay completion of the Merger.
5.11. Employee Matters.
(a) Following consummation of the Merger, HUBCO agrees with LFB to honor
the existing written employment and severance contracts with officers and
employees of LFB and Association that are included in the LFB Disclosure
Schedule.
(b) Following consummation of the Merger, the Bank will decide whether to
continue each of the Association and/or LFB's pension and welfare plans for the
benefit of employees of the Association and LFB, or to have such employees
become covered under a HUBCO Pension and Welfare Plan. If HUBCO decides to cover
Association and LFB employees under a HUBCO Pension and Welfare Plan, such
employees will receive credit for prior years of service with the Association
and/or LFB for purposes of determining eligibility to participate, and vesting,
if applicable. No prior existing condition exclusion limitation or uninsured
waiting periods 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 LFB or the
Association immediately prior to the Effective Time (other than those employees
covered by
37
either a written employment agreement or the arrangements set forth in Section
5.11 of the LFB Disclosure Schedule) whose employment is terminated by HUBCO or
the Bank or any of the HUBCO Subsidiaries within one year 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 two
weeks' base pay for each full year such employee was employed by LFB or the
Association or any successor or predecessor thereto or other LFB Subsidiary,
subject to a minimum of two weeks' severance and a maximum of 26 weeks'
severance, together with any accrued but unused and unpaid 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, failure to perform stated duties or willful violation of any
law, rule, or regulation (other than traffic violations or similar offenses).
(d)(i) Each participant in the LFB ESOP not fully vested will, in
accordance with the terms of the LFB ESOP, become fully vested in his or her LFB
ESOP account as of the Effective Time. As soon as practicable after the
execution of this Agreement, LFB and the Association will cooperate to cause the
LFB ESOP to be amended, if necessary, and other action taken, in a manner
reasonably acceptable to LFB and HUBCO, to provide that the LFB ESOP will
terminate according to its terms upon the Effective Time. Between the date
hereof and the Effective Time, the existing LFB ESOP indebtedness shall be paid
in the ordinary course of business pursuant to the existing loan amortization
schedule and LFB or the Association shall make such contributions to the LFB
ESOP as necessary to fund such payments. Any indebtedness of the LFB ESOP
remaining as of the Effective Time shall be repaid from the Trust associated
with the LFB ESOP through application of cash proceeds or sale of the HUBCO
Common Stock received by the LFB ESOP; provided, however, that any related sale
or distribution of shares by the LFB ESOP shall be effected in accordance with
the requirements of federal and any applicable state securities laws and
regulations, including any rules of the NASD. Upon the repayment of the LFB ESOP
loan, the remaining funds in the LFB ESOP suspense account will be allocated (to
the extent permitted by Sections 401(a), 415 or 4975 of the Code and the
applicable laws and regulations including, without limitation, the applicable
provisions of ERISA) to LFB ESOP participants (as determined under the terms of
the LFB ESOP). LFB and HUBCO agree that, subject to the conditions described
herein, as soon as practicable after the Effective Time and repayment of the LFB
ESOP loan, participants in the LFB ESOP shall be entitled at their election to
have the amounts in their LFB ESOP accounts either distributed to them in a lump
sum or rolled over to another tax-qualified plan (including HUBCO or Bank plans
to the extent permitted by HUBCO) or individual retirement account.
(ii) The actions relating to termination of the LFB ESOP will be adopted
conditioned upon the consummation of the Merger and upon receiving a favorable
determination letter from the Internal Revenue Service ("IRS") with regard to
the continued qualification and termination of the LFB ESOP after any required
amendments. LFB will submit appropriate requests for any such determination
letter to the IRS and will use their best efforts to seek the issuance of such
letter as soon as practicable following the date hereof. LFB and HUBCO will
adopt such additional amendments to the LFB ESOP as may be reasonably required
by the IRS as a condition to granting such determination letter, provided that
such amendments do not (A) substantially change the terms outlined herein, (B)
have a Material
38
Adverse Change other than as disclosed in the LFB Disclosure Schedule on LFB or
(C) result in an additional material liability to HUBCO.
(iii) As of and following the Effective Time, HUBCO shall cause the LFB
ESOP to be maintained for the exclusive benefit of employees and other persons
who were participants or beneficiaries therein prior to the Effective Time and
proceed with termination of the LFB ESOP through distribution of its assets in
accordance with its terms subject to the amendments described herein and as
otherwise may be required to comply with applicable law or to obtain a favorable
determination from the IRS as to the continuing qualified status of the LFB
ESOP, provided, however, that no such termination distributions of the LFB ESOP
shall occur after the Effective Time until a favorable termination letter has
been received from the IRS. LFB shall cause the LFB ESOP to be amended,
effective as of the Effective Time, to provide that the administrative committee
thereof shall consist of two individuals appointed by HUBCO as of the Effective
Time.
(e) HUBCO may elect to continue or terminate LFB's defined benefit pension
plan or merge such plan into HUBCO's defined benefit pension plan.
(f) HUBCO may elect to continue LFB's 401(k) plan or merge such plan into
HUBCO's 401(k) plan. Employees of LFB and the Association who become employees
of HUBCO or any HUBCO Subsidiary shall either continue in LFB's 401(k) plan or
become entitled to participate in the applicable HUBCO retirement savings plan
("401(k) Plan") in accordance with its terms.
(g) HUBCO will honor the Little Falls Bank Directors Consultation and
Retirement Plan, as it has been amended to terminate at the Effective Time and
pay-out not more than $400,000 (all of which shall have been accrued on the
books of LFB by Closing) in the aggregate to the participants thereunder in full
satisfaction of the Association's and LFB's obligations. HUBCO will also honor
the Directors Health Benefits Plan as it has been amended to terminate at the
Effective Time and pay-out not more than the $230,000, which has been accrued on
the books of LFB as a liability of LFB in connection therewith, to the
participants thereunder in full satisfaction of the Association and LFB's
obligations thereunder.
(h) At the Effective Time LFB may pay its employees for all unused vacation
as of the Effective Time.
(i) HUBCO at the Closing will offer each director of LFB a position on a
HUBCO advisory board for a period of 36 months with continuation of current
director fees (only for any director receiving direct fees on the date of this
Agreement) of $1,440 per month to such director during such period as scheduled
in the LFB Disclosure Schedule.
(j) As of the Effective Time, all awards under LFB's Stock Option MSBP and
Director Plans shall be vested and non-forfeitable.
(k) Association and LFB shall continue its employee, officer and director
bonus policies as scheduled in the LFB Disclosure Schedule through Closing.
39
(l) As of the Effective Time, LFB and the Association shall terminate
Leonard G. Romaine as President and Chief Executive Officer upon payment of a
$200,000 lump sum. On or before Effective Time, HUBCO shall enter into a
Consulting Agreement as detailed at Schedule 5.11(l) of the LFB Disclosure
Schedule.
(m) No employment agreements between the Association and its employees
shall be renewed from the date of this Agreement through the Effective Time.
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 LFB.
(a) For planning purposes, LFB shall, within 30 days from the date hereof,
provide HUBCO with its estimated budget of transaction-related expenses
reasonably anticipated to be payable by LFB 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.
LFB shall promptly notify HUBCO if or when it determines that it will expect to
exceed its budget.
(b) Promptly after the execution of this Agreement, LFB shall ask all of
its attorneys and other professionals to render current and correct invoices for
all unbilled time and disbursements within 30 days. LFB shall accrue and/or pay
all of such amounts as soon as possible.
(c) LFB shall cause its professionals to render monthly invoices within 30
days after the end of each month. LFB shall advise HUBCO monthly of all
out-of-pocket expenses which LFB has incurred in connection with this
transaction.
(d) HUBCO, in reasonable consultation with LFB, shall make all arrangements
with respect to the printing and mailing of the Proxy Statement-Prospectus.
5.14 Indemnification.
(a) For a period of six years after the Effective Time, HUBCO shall
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof or who becomes prior to the Effective Time, a
director, officer, employee or agent of LFB or the Association or serves or has
served at the request of LFB or the Association in any
41
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 LFB or the Association or
serves or has served at the request of LFB or the Association in any capacity
with any other person, in connection with, arising out of or relating to (i) any
threatened, pending or completed claim, action, suit or proceeding (whether
civil, criminal, administrative or investigative), including, without
limitation, any and all claims, actions, suits, proceedings or investigations by
or on behalf of or in the right of or against LFB or the Association or any of
their respective affiliates, or by any former or present shareholder of LFB
(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 LFB or the Association or of any committee of LFB's or the
Association's Board of Directors, the events leading up to the execution of this
Agreement, any statement, recommendation or solicitation made in connection
therewith or related thereto and any breach of any duty in connection with any
of the foregoing, or (ii) the enforcement of the obligations of HUBCO set forth
in this Section 5.14, in each case to the fullest extent which LFB or the
Association would have been permitted under any applicable law and their
respective Certificates of Incorporation or Bylaws had the Merger not occurred
(and HUBCO shall also advance expenses as incurred to the fullest extent so
permitted). Notwithstanding the foregoing, but subject to subsection (b) below,
HUBCO shall not provide any indemnification or advance any expenses with respect
to any Claim which relates to a personal benefit improperly paid or provided, or
alleged to have been improperly paid or provided, to the Indemnitee, but HUBCO
shall reimburse the Indemnitee for costs incurred by the Indemnitee with respect
to such Claim when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and nonappealable,
that the Indemnitee was not improperly paid or provided with the personal
benefit alleged in the Claim.
(b) From and after the Effective Time, HUBCO shall assume and honor any
obligation of LFB or the Association immediately prior to the Effective Time
with respect to the indemnification of the Indemnitees arising out of the
Certificate of Incorporation or Bylaws of LFB or the Association, or arising out
of any written indemnification agreements between LFB and/or the Association and
such persons disclosed in the LFB Disclosure Schedule, as if such obligations
were pursuant to a contract or arrangement between HUBCO and such Indemnitees.
(c) In the event HUBCO or any of its successors or assigns (i) reorganizes
or consolidates with or merges into or enters into another business combination
transaction with any other person or entity and is not the resulting, continuing
or surviving corporation or entity of such consolidation, merger or transaction,
or (ii) liquidates, dissolves or transfers all or substantially all of its
properties and assets to any person or entity, then, and in each such case,
proper provision shall be made so that the successors and assigns of HUBCO
assume the obligations set forth in this Section 5.14.
(d) HUBCO shall cause LFB's and the Association's officers and directors to
be covered under a run-off rider applicable to LFB and the Association under
HUBCO's
41
then current officers' and directors' liability insurance policy for a period of
six years after the Effective Time, or, in the alternative at HUBCO's option, to
be covered under a tail extension of LFB's and the Association's existing
officers' and directors' liability insurance policy. However, HUBCO shall only
be required to insure such persons upon terms and for coverages substantially
similar to LFB's and the Association's existing officers' and directors'
liability insurance.
(e) Any Indemnitee wishing to claim indemnification under this Section 5.14
shall promptly notify HUBCO upon learning of any Claim, but the failure to so
notify shall not relieve HUBCO of any liability it may have to such Indemnitee
if such failure does not materially prejudice HUBCO. In the event of any Claim
(whether arising before or after the Effective Time) as to which indemnification
under this Section 5.14 is applicable, (x) HUBCO shall have the right to assume
the defense thereof and HUBCO shall not be liable to such Indemnitees for any
legal expenses of other counsel or any other expenses subsequently incurred by
such Indemnitee in connection with the defense thereof, except that if HUBCO
elects not to assume such defense, or counsel for the Indemnitees advises that
there are issues which raise conflicts of interest between HUBCO and the
Indemnitees, the Indemnitees may retain counsel satisfactory to them, and HUBCO
shall pay the reasonable fees and expenses of such counsel for the Indemnitees
as statements therefor are received; provided, however, that HUBCO shall be
obligated pursuant to this Section 5.14(e) to pay for only one firm of counsel
for all Indemnitees in any jurisdiction with respect to a matter unless the use
of one counsel for multiple Indemnitees would present such counsel with a
conflict of interest that is not waived, and (y) the Indemnitees will cooperate
in the defense of any such matter. HUBCO shall not be liable for settlement of
any claim, action or proceeding hereunder unless such settlement is effected
with its prior written consent. Notwithstanding anything to the contrary in this
Section 5.14, HUBCO shall not have any obligation hereunder to any Indemnitee
when and if a court of competent jurisdiction shall ultimately determine, and
such determination shall have become final and nonappealable, that the
indemnification of such Indemnitee in the manner contemplated hereby is
prohibited by applicable law or public policy.
5.15 Bank Policies and Bank Merger. Notwithstanding that LFB believes that
it has established all reserves and taken all provisions for possible loan
losses required by GAAP and applicable laws, rules and regulations, LFB
recognizes that HUBCO may have adopted different loan, accrual and reserve
policies (including loan classifications and levels of reserves for possible
loan losses). From and after the date of this Agreement to the Effective Time
and in order to formulate the plan of integration for the Bank Merger, LFB and
HUBCO shall consult and cooperate with each other with respect to (i) conforming
to the extent appropriate, based upon such consultation, LFB's loan, accrual and
reserve policies and LFB's other policies and procedures regarding applicable
regulatory matters, including without limitation Federal Reserve, the Bank
Secrecy Act and FDIC matters, to those policies of HUBCO as HUBCO may reasonably
identify to LFB from time to time, (ii) new extensions of credit or material
revisions to existing terms of credits by the Association, in each case where
the aggregate exposure exceeds $500,000, and (iii) conforming, based upon such
consultation, the composition of the investment portfolio and overall
asset/liability management position of LFB and the Association to the extent
appropriate; provided that any required change in LFB's practices in connection
with the matters described in clause (i) or (iii) above need not be effected (A)
more than five days prior to the Effective Time and (B) unless and until HUBCO
agrees in writing that all conditions precedent to the Determination Date have
occurred and HUBCO has provided the Closing Notice. No accrual or
42
reserve made by LFB or any LFB 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 Tax-Free Reorganization Treatment. Before the Effective Time, neither
HUBCO nor LFB 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
"reorganization" within the meaning of Section 368(a) of the Code. Subsequent to
the Effective Time, HUBCO shall not take and shall cause the Surviving
Corporation not to take any action within their control that would disqualify
the Merger as such a "reorganization" under the Code.
5.17 Comfort Letters. HUBCO shall cause Arthur Andersen, its independent
public accountants, to deliver to LFB, and LFB shall cause R&C, its independent
public accountants, to deliver to HUBCO and to its officers and directors who
sign the Registration Statement for this transaction, a short-form "comfort
letter" or "agreed upon procedures" letter, dated the date of the mailing of the
Proxy Statement-Prospectus for the Shareholders Meeting of LFB, in the form
customarily issued by such accountants at such time in transactions of this
type.
5.18 Affiliates. Promptly, but in any event within two weeks, after the
execution and delivery of this Agreement, LFB shall deliver to HUBCO (a) a
letter identifying all persons who, to the knowledge of LFB, may be deemed to be
affiliates of LFB under Rule 145 of the 1933 Act, including, without limitation,
all directors and executive officers of LFB and (b) cause each officer and
director, and use its reasonable best efforts to cause each other person who may
be deemed to be an affiliate of LFB, to execute and deliver to HUBCO a letter
agreement, substantially in the form of Exhibit 5.18, agreeing to comply with
Rule 145.
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 LFB and, if required, by the requisite vote of the
shareholders of HUBCO. The HUBCO Registration Statement shall have been declared
effective by the SEC and shall not be subject to a stop order or any threatened
stop order, and the issuance of the HUBCO Common Stock shall have been qualified
in every state where such qualification is required under the applicable state
securities laws.
(b) Regulatory Filings. All necessary regulatory or governmental approvals
and consents (including without limitation any required approval of the FDIC,
the OTS, the Department, the FRB, the SEC and (if necessary) the DEP) required
to consummate the transactions contemplated hereby shall have been obtained
without the imposition of any non-
43
standard or non-customary term or condition which would materially impair the
value of LFB and the Association, taken as a whole, to HUBCO. All conditions
required to be satisfied prior to the Effective Time by the terms of such
approvals and consents shall have been satisfied; and all statutory waiting
periods in respect thereof (including the Hart-Scott-Rodino waiting period if
applicable) shall have expired.
(c) Suits and Proceedings. No order, judgment or decree shall be
outstanding against a party hereto or a third party that would have the effect
of preventing completion of the Merger; no suit, action or other proceeding
shall be pending or threatened by any Governmental Entity in which it is sought
to restrain or prohibit the Merger; and no suit, action or other proceeding
shall be pending before any court or Governmental Entity in which it is sought
to restrain or prohibit the Merger or obtain other substantial monetary or other
relief against one or more parties hereto in connection with this Agreement and
which HUBCO or LFB determines in good faith, based upon the advice of their
respective counsel, makes it inadvisable to proceed with the Merger because any
such suit, action or proceeding has a significant potential to be resolved in
such a way as to deprive the party electing not to proceed of any of the
material benefits to it of the Merger.
(d) Tax Opinion. HUBCO and LFB shall each have received an opinion, dated
as of the Effective Time, of Pitney, Hardin, Kipp & Szuch, reasonably
satisfactory in form and substance to LFB and its counsel and to HUBCO, based
upon representation letters reasonably required by such counsel, dated on or
about the date of such opinion, and such other facts and representations as such
counsel may reasonably deem relevant, to the effect that: (i) the Merger will be
treated for federal income tax purposes as a reorganization qualifying under the
provisions of Section 368(a) of the Code; (ii) no gain or loss shall be
recognized upon the exchange of LFB Common Stock solely for Hubco Common Stock;
(iii) in the case of LFB shareholders who receive cash in whole or in part in
exchange for their LFB Common Stock, gain, if any, realized by the recipient on
the exchange shall be recognized, but in an amount not in excess of the amount
of such cash; (iv) in the case of LFB shareholders who recognize gain on the
exchange of their LFB Common Stock and in whose hands such stock was a capital
asset on the date of the exchange, such gain shall be treated as capital gain
(long-term or short-term, depending on the shareholders' respective holding
periods for their LFB Common Stock), except in the case of any such shareholder
as to which the exchange has the effect of a dividend within the meaning of
Section 356(a)(2) of the Code by reason of the applicability of the stock
attribution rules of Section 318 of the Code, it being understood that the
applicability of such attribution rules to any particular shareholder shall
depend on such shareholder's particular factual circumstances; (v) the basis of
any Hubco Common Stock received in exchange for LFB Common Stock shall equal the
basis of the recipient's LFB Common Stock surrendered on the exchange, reduced
by the amount of cash received, if any, on the exchange, and increased by the
amount of the gain recognized, if any, on the exchange (whether characterized as
dividend or capital gain income); and (vi) the holding period for any Hubco
Common Stock received in exchange for LFB Common Stock will include the period
during which the LFB Common Stock surrendered on the exchange was held, provided
such stock was held as a capital asset on the date of the exchange.
6.2. Conditions to the Obligations of HUBCO Under this Agreement. The
obligations of HUBCO under this Agreement shall be further subject to the
satisfaction or waiver, at or prior to the Effective Time, of the following
conditions:
44
(a) Representations and Warranties; Performance of Obligations of LFB and
the Association. Except for those representations which are made as of a
particular date, the representations and warranties of LFB 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. LFB 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 LFB 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 LFB Disclosure Schedule,
materially adversely affect the representation as to which the supplement or
amendment relates.
(b) Opinion of Counsel. HUBCO shall have received an opinion of counsel to
LFB, dated the Closing Date, in form and substance reasonably satisfactory to
HUBCO, substantially to the effect set forth in accordance with Exhibit 6.2(b)
hereto.
(c) Certificates. LFB shall have furnished HUBCO with such certificates of
its officers or other documents to evidence fulfillment of the conditions set
forth in this Section 6.2 as HUBCO may reasonably request.
(d) Legal Fees. LFB shall have furnished HUBCO with letters from all
attorneys representing LFB and the Association in any matters confirming that
all legal fees in excess of $5,000 have been paid in full for services rendered
as of the Effective Time.
(e) Merger Related Expense. LFB shall have provided HUBCO with an
accounting of all merger related expenses incurred by it through the Closing
Date, including a good faith estimate of such expenses incurred but as to which
invoices have not been submitted as of the Closing Date. The merger related
expenses of LFB, other than printing expenses (which are within the control of
HUBCO), shall be reasonable, taking into account normal and customary billing
rates, fees and expenses for similar transactions. Any amounts less than 10
percent over budget shall be presumed reasonable.
(f) Termination of Director Retirement, Post-Employment Health Benefit
Plans and Option Grants. LFB shall have effectively terminated the Director
Retirement Plan with no more than $400,000 in required payments and all of the
participants shall have agreed to the termination of such Plan and the
limitation on such payments and the waiver of any other payments or benefits.
LFB shall have effectively terminated the January 1, 1995 Director Health
Benefits Plan ("Directors Health Benefits Plan")with payments no more than the
amount accrued as of the Effective Time on its books (which shall be no more
than $230,000 above the amount accrued on the date hereof) and all of the
participants shall have agreed to the termination of such Plan and the waiver of
any other payments or benefits. The Directors of LFB and/or the Association
shall, irrespective of any provision in this Agreement or in the LFB Stock
Option Plan
45
or any of the Option Grant Agreements, consent to the expiration of all
outstanding stock options awarded by LFB to the directors, if not exercised
within 90 days from the Effective Time.
6.3. Conditions to the Obligations of LFB Under this Agreement. The
obligations of LFB under this Agreement shall be further subject to the
satisfaction or waiver, at or prior to the Effective Time, of the following
conditions:
(a) Representations and Warranties; Performance of Obligations of HUBCO.
Except for those representations which are made as of a particular date, the
representations and warranties of HUBCO contained in this Agreement shall be
true and correct in all material respects on the Closing Date as though made on
and as of the Closing Date, except to the extent waived pursuant to Section 5.12
hereof. HUBCO shall have performed in all material respects the agreements,
covenants and obligations to be performed by it prior to the Closing Date. With
respect to any representation or warranty which as of the Closing Date has
required a supplement or amendment to the HUBCO Disclosure Schedule to render
such representation or warranty true and correct in all material respects as of
the Closing Date, the representation and warranty shall be deemed true and
correct as of the Closing Date only if (i) the information contained in the
supplement or amendment to the Disclosure Schedule related to events occurring
following the execution of this Agreement and (ii) the facts disclosed in such
supplement or amendment would not either alone, or together with any other
supplements or amendments to the HUBCO Disclosure Schedule, materially adversely
affect the representation as to which the supplement or amendment relates.
(b) Opinion of Counsel to HUBCO. LFB shall have received an opinion of
counsel to HUBCO, dated the Closing Date, in form and substance reasonably
satisfactory to LFB, substantially to the effect set forth in accordance with
Exhibit 6.3(b) hereto.
(c) Fairness Opinion. LFB shall have received an opinion from FinPro, dated
no more than three days prior to the date the Proxy Statement-Prospectus is
mailed to LFB'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 LFB hereunder is
fair to such shareholders from a financial point of view ("Fairness Opinion")
and such Fairness Opinion shall be updated as of the Effective Time.
(d) Certificates. HUBCO shall have furnished LFB with such certificates of
its officers and such other documents to evidence fulfillment of the conditions
set forth in this Section 6.3 as LFB 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
LFB:
(a) by mutual written consent of the parties hereto;
(b) by HUBCO or LFB (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
46
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 LFB is taken and such
shareholders fail to approve this Agreement at the meeting (or any adjournment
or postponement thereof) held for such purpose (provided that the terminating
party shall not be in material breach of any of its obligations under Section
5.7 hereof), or (iii) if a vote of the shareholders of HUBCO is required by
applicable NASDAQ rules, such vote is taken and such shareholders fail to
approve this Agreement at the meeting (or any adjournment or postponement
thereof) held for such purpose (provided that the terminating party shall not be
in material breach of any of its obligations under Section 5.7 hereof);
(c) by HUBCO or LFB upon written notice to the other if any application for
regulatory or governmental approval necessary to consummate the Merger and the
other transactions contemplated hereby shall have been denied or withdrawn at
the request or recommendation of the applicable regulatory agency or
Governmental Entity or by HUBCO upon written notice to LFB 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 LFB and the Association, taken as a whole, to HUBCO;
(d) by HUBCO if (i) there shall have occurred an LFB Material Adverse
Change from that disclosed by LFB in LFB's Quarterly Report on Form 10-Q for the
nine months ended September 30, 1998 (it being understood that those matters
disclosed in the LFB 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 LFB hereunder and
such breach shall not have been remedied within 30 days after receipt by LFB of
notice in writing from HUBCO to LFB specifying the nature of such breach and
requesting that it be remedied;
(e) by LFB, if (i) there shall have occurred a HUBCO Material Adverse
Change from that disclosed by HUBCO in HUBCO's Report on Form 10-Q for the nine
months ended September 30, 1998, which change shall have resulted in a material
adverse effect on HUBCO (it being understood that those matters disclosed in the
HUBCO Disclosure Schedule shall not be deemed to constitute such a material
adverse effect); or (ii) there was a material breach in any representation,
warranty, covenant, agreement or obligation of HUBCO hereunder and such breach
shall not have been remedied within 30 days after receipt by HUBCO of notice in
writing from LFB specifying the nature of such breach and requesting that it be
remedied;
(f) by LFB, if LFB'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 and
have agreed in writing that a Triggering Event has occurred under the HUBCO
Stock Option;
(g) by HUBCO if the conditions set forth in Sections 6.1 and 6.2 are not
satisfied and are not capable of being satisfied by the Cutoff Date; or
(h) by LFB 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.
47
7.2. Effect of Termination. In the event of the termination and abandonment
of this Agreement by either HUBCO or LFB 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 LFB 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 LFB 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, LFB may bear the expenses of the Association.
(b) Notwithstanding any provision in this Agreement to the contrary, in the
event that either of the parties shall willfully default in its obligations
hereunder, the non-defaulting party may pursue any remedy available at law or in
equity to enforce its rights and shall be paid by the willfully defaulting party
for all damages, costs and expenses, including without limitation legal,
accounting, investment banking and printing expenses, incurred or suffered by
the non-defaulting party in connection herewith or in the enforcement of its
rights hereunder.
8.2. Survival. The respective representations, warranties, covenants and
agreements of the parties to this Agreement shall not survive the Effective
Time, but shall terminate as of the Effective Time, except for Article II, this
Section 8.2 and Sections 5.5(b), 5.8(a) 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:
48
(a) If to HUBCO, to:
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, NJ 07430
Attn.: Kenneth T. Neilson, Chairman,
President and Chief Executive Officer
Copy to:
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, NJ 07430
Attn.: D. Lynn Van Borkulo-Nuzzo, Esq.
And copy to:
Pitney, Hardin, Kipp & Szuch
(mail to) P.O. Box 1945
Morristown, NJ 07962
(deliver to) 200 Campus Drive
Florham Park, NJ 07932
Attn.: Michael W. Zelenty, Esq.
(b) If to LFB, to:
Little Falls Bancorp, Inc.
86 Main Street
Little Falls, NJ 07424
Attn.: Leonard G. Romaine, President
and Chief Executive Officer
Copy to:
Malizia, Spidi, Sloane & Fisch, P.C.
One Franklin Square
1301 K Street, N.W., Suite 700E
Washington, D.C. 20005
Attn.: Richard Fisch, 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.
49
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.
50
8.7. Governing Law. This Agreement shall be governed by the laws of the
State of New Jersey, without giving effect to the principles of conflicts of
laws thereof.
8.8. Descriptive Headings. The descriptive headings of this Agreement are
for convenience only and shall not control or affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, HUBCO, the Bank, LFB and the Association have caused
this Agreement to be executed by their duly authorized officers as of the day
and year first above written.
ATTEST: HUBCO, INC.
By: /s/ Lynn Van Borkulo-Nuzzo By: /s/ Kenneth T. Neilson, Chairman
----------------------------- --------------------------------------
D. Lynn Van Borkulo-Nuzzo, Kenneth T. Neilson, Chairman,
Secretary President and Chief Executive Officer
ATTEST: LITTLE FALLS BANCORP, INC.
By: _____________________________ By: /s/ Albert J. Weite
--------------------------------------
Albert J. Weite
Corporate Secretary Chairman
ATTEST: HUDSON UNITED BANK
By: /s/ D. Lynn Van Borkulo-Nuzo By: /s/ Kenneth T. Neilson, Chairman
----------------------------- --------------------------------------
D. Lynn Van Borkulo-Nuzzo, Kenneth T. Neilson, Chairman,
Secretary President and Chief Executive Officer
ATTEST: LITTLE FALLS BANK
By: ________________________ By: /s/ Albert J. Weite
--------------------------------------
Albert J. Weite
Corporate Secretary Chairman