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 Dime Financial Corporation, a Connecticut
corporation and registered bank holding company ("DFC").
BACKGROUND
WHEREAS, HUBCO and DFC, as of the date hereof, are prepared to
execute a definitive agreement and plan of merger (the "Merger Agreement")
pursuant to which DFC will be merged with and into HUBCO (the "Merger"); and
WHEREAS, HUBCO has advised DFC that it will not execute the
Merger Agreement unless DFC executes this Agreement; and
WHEREAS, the Board of Directors of DFC has determined that the
Merger Agreement provides substantial benefits to the shareholders of DFC; and
WHEREAS, as an inducement to HUBCO to enter into the Merger
Agreement and in consideration for such entry, DFC desires to grant to HUBCO an
option to purchase authorized but unissued shares of common stock of DFC 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 DFC,
intending to be legally bound hereby, agree:
1. Grant of Option. DFC hereby grants to HUBCO the option to
purchase 1,040,000 shares of common stock, $1.00 par value, of DFC (the "Common
Stock") at a price of $30.25 per share (the "Option Price"), on the terms and
conditions set forth herein (the "Option"); provided that in no event shall the
number of shares of Common Stock for which the Option is exercisable exceed
19.9% of DFC's issued and outstanding shares of Common Stock without giving
effect to any shares subject to or issued pursuant to 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 20% of
the then outstanding shares of Common Stock; or
b. enters into a letter of intent or an agreement,
whether oral or written, with DFC pursuant to which such person or any affiliate
of such person would (i) merge or consolidate, or enter into any similar
transaction, with DFC, (ii) acquire all or a significant portion of the assets
or liabilities of DFC, or (iii) acquire beneficial ownership of securities
representing, or the right to acquire beneficial ownership or to vote securities
representing, 20% or more of the then outstanding shares of Common Stock; or
c. makes a filing with any bank or thrift regulatory
authorities or publicly announces a bona fide proposal (a "Proposal") for (i)
any merger with, consolidation with or acquisition of all or a significant
portion of all the assets or liabilities of, DFC or any other business
combination involving DFC, or (ii) a transaction involving the transfer of
beneficial ownership of securities representing, or the right to acquire
beneficial ownership or to vote securities representing, 20% or more of the
outstanding shares of Common Stock, and thereafter, if such Proposal has not
been Publicly Withdrawn (as such term is hereinafter defined) at least 15 days
prior to the meeting of stockholders of DFC called to vote on the Merger and
DFC'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, DFC 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 DFC or any of its directors, officers or
agents with the intention of inviting, encouraging or soliciting any proposal
which has as its purpose a tender offer for the shares of Common Stock, a
merger, consolidation, plan of exchange, plan of acquisition or reorganization
of DFC, 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 DFC. The term "significant number" means 20% of the outstanding
shares of Common Stock.
"Publicly Withdrawn", for purposes of clauses (c) and (d)
above, shall mean an unconditional bona fide withdrawal of the Proposal coupled
with a public announcement of no further interest in pursuing such Proposal or
in acquiring any controlling influence over DFC or in soliciting or inducing any
other person (other than HUBCO or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised
at any time (i) in the absence of any required governmental or regulatory
approval or consent necessary for DFC 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.
DFC 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 DFC shall not be a condition to the right of HUBCO to exercise the
Option. DFC will not take any action which would have the effect of preventing
or disabling DFC 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 DFC (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 DFC of the aggregate price for the
Option Shares so purchased by wire transfer of immediately available funds to an
account designated by DFC; (b) DFC 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 DFC, 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 Dime Financial Corporation,
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, DFC 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 DFC 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 DFC shall not be required
to prepare and file any such registration statement in connection with any
proposed sale with respect to which counsel to DFC delivers to DFC 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 DFC may delay any
registration of Option Shares above for a period not exceeding 90 days in the
event that DFC shall in good faith determine that any such registration would
adversely effect an offering of securities by DFC for cash. HUBCO shall provide
all information reasonable requested by DFC for inclusion in any registration
statement to be filed hereunder.
In connection with such filing, DFC 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 DFC 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 DFC and blue sky fees and expenses shall be paid by DFC.
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, DFC 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 DFC 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 DFC 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 DFC 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 DFC for any legal or
other expense reasonably incurred by DFC 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 DFC
with another entity, or any sale of all or substantially all of the assets of
DFC, 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 DFC 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 York Department of Banking, and
DFC 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 DFC. DFC hereby
represents and warrants to HUBCO as follows:
a. Due Authorization. DFC 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 DFC.
b. Authorized Shares. DFC 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 DFC or any agreement,
instrument, judgment, decree or order applicable to DFC.
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 DFC 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 DFC:
Dime Financial Corporation
00 Xxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
With a copy to:
Day, Xxxxx & Xxxxxx
CityPlace I
Xxxxxxxx, XX 00000
Attention: Xxxx X. XxXxxxxxx, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
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.
20. Effectiveness and Termination Fee. Solely for the purposes
of the Connecticut Banking Laws, Section 36a-184, this Agreement shall not be
considered effective until and unless it is submitted to and approved by the
Commissioner of the Connecticut Department of Banking (the "Commissioner"). DFC
shall pay HUBCO a termination fee of $5,000,000 (the "Termination Fee"),
forthwith on demand, in lieu of all its other rights hereunder, if each of the
following conditions are met: (a) the Option never becomes effective due to a
failure by the Commissioner to make a determination that the Option may be
exercised, after a request for approval by HUBCO to do so is submitted by HUBCO
to the Commissioner, and either the Commissioner makes a determination that the
Option may not be exercised or a period of five months elapses from the date the
request is submitted by HUBCO; (b) a Triggering Event has occurred, which would
allow HUBCO to exercise the Option; and (c) DFC is merged or acquired by another
financial institution within 18 months following the Triggering Event. In the
event that HUBCO is due the Termination Fee hereunder and DFC fails to pay such
Fee on demand by HUBCO, DFC shall in addition reimburse HUBCO for the legal fees
and expenses incurred by HUBCO in seeking to enforce and in collecting the
Termination Fee.
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.
DIME FINANCIAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
HUBCO, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx,
President & Chief Executive Officer
