STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated as of March
31, 1998, is by and between HUBCO, Inc., a New Jersey corporation and registered
bank holding company ("HUBCO"), and IBS Financial Corp., a New Jersey
corporation and registered savings and loan holding company ("IBSF").
BACKGROUND
WHEREAS, HUBCO and IBSF, as of the date hereof, are prepared
to execute a definitive agreement and plan of merger (the "Merger Agreement")
pursuant to which IBSF will be merged with and into HUBCO (the "Merger"); and
WHEREAS, HUBCO has advised IBSF that it will not execute the
Merger Agreement unless IBSF executes this Agreement; and
WHEREAS, the Board of Directors of IBSF has determined that
the Merger Agreement provides substantial benefits to the shareholders of IBSF;
and
WHEREAS, as an inducement to HUBCO to enter into the Merger
Agreement and in consideration for such entry, IBSF desires to grant to HUBCO an
option to purchase authorized but unissued shares of common stock of IBSF in an
amount and on the terms and conditions hereinafter set forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
agreements set forth herein and in the Merger Agreement, HUBCO and IBSF,
intending to be legally bound hereby, agree:
1. Grant of Option. IBSF hereby grants to HUBCO an option to
purchase 2,700,000 shares of common stock, $.01 par value, of IBSF (the "Common
Stock") at a price of $18.00 per share (the "Option Price"), on the terms and
conditions set forth herein (the "Option").
2. Exercise of Option. This Option shall not be exercisable
until the occurrence of a Triggering Event (as such term is hereinafter
defined). Upon or after the occurrence of a Triggering Event (as such term is
hereinafter defined), HUBCO may exercise the Option, in whole or in part, at any
time or from time to time, subject to the terms and conditions set forth herein
and the termination provisions of Section 19 of this Agreement.
The term "Triggering Event" means the occurrence of any of the
following events:
A person or group (as such terms are defined in the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder) other than HUBCO or an affiliate of HUBCO:
a. acquires beneficial ownership (as such term is
defined in Rule 13d-3 as promulgated under the Exchange Act) of at least 15% of
the then outstanding shares of Common Stock; or
b. enters into a letter of intent or an agreement,
whether oral or written, with IBSF pursuant to which such person or any
affiliate of such person would (i) merge or consolidate, or enter into any
similar transaction, with IBSF, (ii) acquire all or a significant portion of the
assets or liabilities of IBSF, or (iii) acquire beneficial ownership of
securities representing, or the right to acquire beneficial ownership or to vote
securities representing, 15% or more of the then outstanding shares of Common
Stock; or
c. makes a filing with any bank or thrift regulatory
authorities with respect to or publicly announces a bona fide proposal (a
"Proposal") for (i) any merger with, consolidation with or acquisition of all or
a significant portion of all the assets or liabilities of, IBSF or any other
business combination involving IBSF, or (ii) a transaction involving the
transfer of beneficial ownership of securities representing, or the right to
acquire beneficial ownership or to vote securities representing, 15% or more of
the outstanding shares of Common Stock, and in either case thereafter, if such
Proposal has not been Publicly Withdrawn (as such term is hereinafter defined)
at least 15 days prior to the meeting of stockholders of IBSF called to vote on
the Merger and IBSF's stockholders fail to approve the Merger by the vote
required by applicable law at the meeting of stockholders called for such
purpose; or
d. makes a bona fide Proposal and thereafter, but
before such Proposal has been Publicly Withdrawn, IBSF willfully takes any
action in any manner which would materially interfere with its ability to
consummate the Merger or materially reduce the value of the transaction to
HUBCO.
The term "Triggering Event" also means the taking of any
material direct or indirect action by IBSF or any of its directors, senior
executive officers, investment bankers or other person with actual or apparent
authority to speak for the Board of Directors, inviting, encouraging or
soliciting any proposal (other than from HUBCO or an affiliate of HUBCO) which
has as its purpose a tender offer for the shares of Common Stock, a merger,
consolidation, plan of exchange, plan of acquisition or reorganization of IBSF,
or a sale of a significant number of shares of Common Stock or any significant
portion of its assets or liabilities.
The term "significant portion" means 25% of the assets or
liabilities of IBSF. The term "significant number" means 15% of the outstanding
shares of Common Stock.
"Publicly Withdrawn", for purposes of clauses (c) and (d)
above, shall mean an unconditional bona fide withdrawal of the Proposal coupled
with a public announcement of no further interest in pursuing such Proposal or
in acquiring any controlling influence over IBSF or in soliciting or inducing
any other person (other than HUBCO or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised
at any time (i) in the absence of any required governmental or regulatory
approval or consent (including any filing, approval or consent required under
the rules and regulations of the National Association of Securities Dealers,
Inc.) necessary for IBSF to issue the shares of Common Stock covered by the
Option (the "Option Shares") or HUBCO to exercise the Option or prior to the
expiration or termination of any waiting period required by law, or (ii) so long
as any injunction or other order, decree or ruling issued by any federal or
state court of competent jurisdiction is in effect which prohibits the sale or
delivery of the Option Shares.
IBSF shall notify HUBCO promptly in writing of the occurrence
of any Triggering Event known to it, it being understood that the giving of such
notice by IBSF shall not be a condition to the right of HUBCO to exercise the
Option. IBSF will not take any action which would have the effect of preventing
or disabling IBSF from delivering the Option Shares to HUBCO upon exercise of
the Option or otherwise performing its obligations under this Agreement, except
to the extent required by applicable securities and banking laws and
regulations.
In the event HUBCO wishes to exercise the Option, HUBCO shall
send a written notice to IBSF (the date of which is hereinafter referred to as
the "Notice Date") specifying the total number of Option Shares it wishes to
purchase and a place and date between two and ten business days inclusive from
the Notice Date for the closing of such a purchase (a "Closing"); provided,
however, that a Closing shall not occur prior to two days after the later of
receipt of any necessary regulatory approvals and the expiration of any legally
required notice or waiting period, if any.
3. Payment and Delivery of Certificates. At any Closing
hereunder (a) HUBCO will make payment to IBSF of the aggregate price for the
Option Shares so purchased by wire transfer of immediately available funds to an
account designated by IBSF; (b) IBSF will deliver to HUBCO a stock certificate
or certificates representing the number of Option Shares so purchased, free and
clear of all liens, claims, charges and encumbrances of any kind or nature
whatsoever created by or through IBSF, registered in the name of HUBCO or its
designee, in such denominations as were specified by HUBCO in its notice of
exercise and, if necessary, bearing a legend as set forth below; and (c) HUBCO
shall pay any transfer or other taxes required by reason of the issuance of the
Option Shares so purchased.
If required under applicable federal securities laws, a legend
will be placed on each stock certificate evidencing Option Shares issued
pursuant to this Agreement, which legend will read substantially as follows:
The shares of stock evidenced by this certificate
have not been registered for sale under the Securities Act of 1933 (the
"1933 Act"). These shares may not be sold, transferred or otherwise
disposed of unless a registration statement with respect to the sale of
such shares has been filed under the 1933 Act and declared effective
or, in the opinion of counsel reasonably acceptable to IBS Financial
Corp., said transfer would be exempt from registration under the
provisions of the 1933 Act and the regulations promulgated thereunder.
No such legend shall be required if a registration statement
is filed and declared effective under Section 4 hereof.
4. Registration Rights. Upon or after the occurrence of a
Triggering Event and upon receipt of a written request from HUBCO, IBSF shall,
if necessary for the resale of the Option or the Option Shares by HUBCO, prepare
and file a registration statement with the Securities and Exchange Commission
and any state securities bureau covering the Option and such number of Option
Shares as HUBCO shall specify in its request, and IBSF shall use its best
efforts to cause such registration statement to be declared effective in order
to permit the sale or other disposition of the Option and the Option Shares,
provided that HUBCO shall in no event have the right to have more than one such
registration statement become effective, and provided further that IBSF shall
not be required to prepare and file any such registration statement in
connection with any proposed sale with respect to which counsel to IBSF delivers
to IBSF and to HUBCO (which is reasonably acceptable to HUBCO) its opinion to
the effect that no such filing is required under applicable laws and regulations
with respect to such sale or disposition; provided further, however, that IBSF
may delay any registration of Option Shares above for a period not exceeding 90
days in the event that IBSF shall in good faith determine that any such
registration would adversely effect an offering of securities by IBSF for cash.
HUBCO shall provide all information reasonable requested by IBSF for inclusion
in any registration statement to be filed hereunder.
In connection with such filing, IBSF shall use its best
efforts to cause to be delivered to HUBCO such certificates, opinions,
accountant's letters and other documents as HUBCO shall reasonably request and
as are customarily provided in connection with registrations of securities under
the Securities Act of 1933, as amended. All expenses incurred by IBSF in
complying with the provisions of this Section 4, including without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for IBSF and blue sky fees and expenses shall be paid by IBSF.
Underwriting discounts and commissions to brokers and dealers relating to the
Option Shares, fees and disbursements of counsel to HUBCO and any other expenses
incurred by HUBCO in connection with such registration shall be borne by HUBCO.
In connection with such filing, IBSF shall indemnify and hold harmless HUBCO
against any losses, claims, damages or liabilities, joint or several, to which
HUBCO may become subject, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
preliminary or final registration statement or any amendment or supplement
thereto, or arise out of a material fact required to be stated therein or
necessary to make the statements therein not misleading; and IBSF will reimburse
HUBCO for any legal or other expense reasonably incurred by HUBCO in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that IBSF will not be liable in any case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such preliminary or final registration statement or such
amendment or supplement thereto in reliance upon and in conformity with written
information furnished by or on behalf of HUBCO specifically for use in the
preparation thereof. HUBCO will indemnify and hold harmless IBSF to the same
extent as set forth in the immediately preceding sentence but only with
reference to written information specifically furnished by or on behalf of HUBCO
for use in the preparation of such preliminary or final registration statement
or such amendment or supplement thereto; and HUBCO will reimburse IBSF for any
legal or other expense reasonably incurred by IBSF in connection with
investigating or defending any such loss, claim, damage, liability or action.
Notwithstanding anything to the contrary herein, no indemnifying party shall be
liable for any settlement effected without its prior written consent.
5. Adjustment Upon Changes in Capitalization. In the event of
any change in the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the like,
then the number and kind of Option Shares and the Option Price shall be
appropriately adjusted.
In the event any capital reorganization or reclassification of
the Common Stock, or any consolidation, merger or similar transaction of IBSF
with another entity, or any sale of all or substantially all of the assets of
IBSF, shall be effected in such a way that the holders of Common Stock shall be
entitled to receive stock, securities or assets with respect to or in exchange
for Common Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions (in form
reasonably satisfactory to the holder hereof) shall be made whereby the holder
hereof shall thereafter have the right to purchase and receive upon the basis
and upon the terms and conditions specified herein and in lieu of the Common
Stock immediately theretofore purchasable and receivable upon exercise of the
rights represented by this Option, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for the number of shares
of Common Stock immediately theretofore purchasable and receivable upon exercise
of the rights represented by this Option had such reorganization,
reclassification, consolidation, merger or sale not taken place; provided,
however, that if such transaction results in the holders of Common Stock
receiving only cash, the holder hereof shall be paid the difference between the
Option Price and such cash consideration without the need to exercise the
Option.
6. Filings and Consents. Each of HUBCO and IBSF will use its
reasonable efforts to make all filings with, and to obtain consents of, all
third parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement.
Exercise of the Option herein provided shall be subject to
compliance with all applicable laws including, in the event HUBCO is the holder
hereof, approval of the Securities and Exchange Commission, the Board of
Governors of the Federal Reserve System, the Office of Thrift Supervision, the
Federal Deposit Insurance Corporation or the New Jersey Department of Banking,
and IBSF agrees to cooperate with and furnish to the holder hereof such
information and documents as may be reasonably required to secure such
approvals.
7. Representations and Warranties of IBSF. IBSF hereby
represents and warrants to HUBCO as follows:
a. Due Authorization. IBSF has full corporate power
and authority to execute, deliver and perform this Agreement and all corporate
action necessary for execution, delivery and performance of this Agreement has
been duly taken by IBSF.
b. Authorized Shares. IBSF has taken and, as long as
the Option is outstanding, will take all necessary corporate action to authorize
and reserve for issuance all shares of Common Stock that may be issued pursuant
to any exercise of the Option.
c. No Conflicts. Neither the execution and delivery
of this Agreement nor consummation of the transactions contemplated hereby
(assuming all appropriate regulatory approvals) will violate or result in any
violation or default of or be in conflict with or constitute a default under any
term of the Certificate of Incorporation or Bylaws of IBSF or any agreement,
instrument, judgment, decree or order applicable to IBSF.
8. Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
Notwithstanding the foregoing, HUBCO shall have the right to seek money damages
against IBSF for a breach of this Agreement.
9. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof.
10. Assignment or Transfer. HUBCO may not sell, assign or
otherwise transfer its rights and obligations hereunder, in whole or in part, to
any person or group of persons other than to an affiliate of HUBCO. HUBCO
represents that it is acquiring the Option for HUBCO's own account and not with
a view to or for sale in connection with any distribution of the Option or the
Option Shares. HUBCO is aware that neither the Option nor the Option Shares is
the subject of a registration statement filed with, and declared effective by,
the Securities and Exchange Commission pursuant to Section 5 of the Securities
Act, but instead each is being offered in reliance upon the exemption from the
registration requirement provided by Section 4(2) thereof and the
representations and warranties made by HUBCO in connection therewith.
11. Amendment of Agreement. Upon mutual consent of the parties
hereto, this Agreement may be amended in writing at any time, for the purpose of
facilitating performance hereunder or to comply with any applicable regulation
of any governmental authority or any applicable order of any court or for any
other purpose.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
13. Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered personally, by express service,
cable, telegram or telex, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
If to HUBCO:
HUBCO, Inc.
0000 XxxXxxxxx Xxxxxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
With a copy to:
Pitney, Xxxxxx, Xxxx & Xxxxx
000 Xxxxxx Xxxxx
Xxxxxxx Xxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
Xxxxxxx X. Xxxxxxx, Esq.
If to IBSF:
IBS Financial Corp.
The Operations Center
0000 X. Xxxxx 00
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
Chairman, President and Chief
Executive Officer
With a copy to:
Elias, Matz, Xxxxxxx & Xxxxxxx L.L.P.
Xxx Xxxxxx Xxxxxxxx, 00xx Xxxxx
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
or to such other address as the person to whom notice is to be
given may have previously furnished to the others in writing in the manner set
forth above (provided that notice of any change of address shall be effective
only upon receipt thereof).
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
15. Captions. The captions in the Agreement are inserted for
convenience and reference purposes, and shall not limit or otherwise affect any
of the terms or provisions hereof.
16. Waivers and Extensions. The parties hereto may, by mutual
consent, extend the time for performance of any of the obligations or acts of
either party hereto. Each party may waive (a) compliance with any of the
covenants of the other party contained in this Agreement and/or (b) the other
party's performance of any of its obligations set forth in this Agreement.
17. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
18. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
19. Termination. This Agreement shall terminate upon either
the termination of the Merger Agreement as provided therein or the consummation
of the transactions contemplated by the Merger Agreement; provided, however,
that if termination of the Merger Agreement occurs after the occurrence of a
Triggering Event (as defined in Section 2 hereof), this Agreement shall not
terminate until the later of 18 months following the date of the termination of
the Merger Agreement or the consummation of any proposed transactions which
constitute the Triggering Event.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to
resolutions adopted by its Board of Directors, has caused this Stock Option
Agreement to be executed by its duly authorized officer, all as of the day and
year first above written.
IBS FINANCIAL CORP.
By: /s/ Xxxxxx X. Xxxxxx, Xx.
-----------------------------------------------
Xxxxxx X. Xxxxxx, Xx.
Chairman, President and Chief Executive Officer
HUBCO, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxxx,
President & Chief Executive Officer
