STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated as of June 28,
1999, is by and between Xxxxxx United Bancorp, a New Jersey corporation and
registered bank holding company ("HUB"), and Southern Jersey Bancorp of
Delaware, Inc., a Delaware corporation and registered bank holding company
("SJBDI").
BACKGROUND
WHEREAS, HUB and SJBDI, as of the date hereof, are prepared to
execute a definitive agreement and plan of merger (the "Merger Agreement")
pursuant to which SJBDI will be merged with and into HUB (the "Merger"); and
WHEREAS, HUB has advised SJBDI that it will not execute the
Merger Agreement unless SJBDI executes this Agreement and SJBDI has advised HUB
that it will not execute the Merger Agreement unless HUB executes this
Agreement; and
WHEREAS, the Board of Directors of SJBDI has determined that
the Merger Agreement provides substantial benefits to the shareholders of SJBDI;
and
WHEREAS, the Board of Directors of HUB has determined that the
Merger Agreement provides substantial benefits to the shareholders of HUB; and
WHEREAS, as an inducement to HUB to enter into the Merger
Agreement and in consideration for such entry, SJBDI desires to grant to HUB an
option to purchase authorized but unissued shares of common stock of SJBDI in an
amount and on the terms and conditions hereinafter set forth; and
WHEREAS, as an inducement to SJBDI to enter into the Merger
Agreement and in consideration for such entry, HUB desires to grant to SJBDI the
right to require HUB to purchase authorized but unissued shares of common stock
of SJBDI to HUB in an amount and on the terms and conditions hereinafter set
forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
agreements set forth herein and in the Merger Agreement, HUB and SJBDI,
intending to be legally bound hereby, agree:
1. Grant of Option. SJBDI hereby grants to HUB an option to purchase 200,000
shares of common stock, $1.67 par value, of SJBDI (the "Common Stock") at a
price of $24.00 per share (the "Option Price"), on the terms and conditions set
forth herein (the "Option").
2. Exercise of Option. The Option shall not be exercisable until the occurrence
of an Option Triggering Event (as such term is hereinafter defined). Upon or
after the occurrence of an Option Triggering Event, HUB may exercise the Option,
in whole or in part, at any time or from time to time, subject to the terms and
conditions set forth herein and the termination provisions of Section 22 of this
Agreement.
The term "Option Triggering Event" means the occurrence of any
of the following events:
A person or group (as such terms are defined in the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder) other than HUB or an affiliate of HUB:
a. acquires beneficial ownership (as such term is defined in Rule 13d-3 as
promulgated under the Exchange Act) of at least 10% of the then outstanding
shares of Common Stock; or
b. enters into a letter of intent or an agreement, whether oral or written, with
SJBDI pursuant to which such person or any affiliate of such person would (i)
merge or consolidate, or enter into any similar transaction, with SJBDI, (ii)
acquire all or a significant portion of the assets or liabilities of SJBDI, or
(iii) acquire beneficial ownership of securities representing, or the right to
acquire beneficial ownership or to vote securities representing, 10% or more of
the then outstanding shares of Common Stock; or
c. makes a filing with any bank or thrift regulatory authorities with respect to
or publicly announces a bona fide proposal (a "Proposal") for (i) any merger
with, consolidation with or acquisition of all or a significant portion of all
the assets or liabilities of, SJBDI or any other business combination involving
SJBDI, or (ii) a transaction involving the transfer of beneficial ownership of
securities representing, or the right to acquire beneficial ownership or to vote
securities representing, 10% or more of the outstanding shares of Common Stock,
and in either case thereafter, if such Proposal has not been Publicly Withdrawn
(as such term is hereinafter defined) at least 15 days prior to the meeting of
stockholders of SJBDI called to vote on the Merger and SJBDI's stockholders fail
to approve the Merger by the vote required by applicable law at the meeting of
stockholders called for such purpose; or
d. makes a bona fide Proposal and thereafter, but before such Proposal has been
Publicly Withdrawn, SJBDI willfully takes any action in any manner which would
materially interfere with its ability to consummate the Merger or materially
reduce the value of the transaction to HUB.
The term "Option Triggering Event" also means the taking of
any material direct or indirect action by SJBDI or any of its directors, senior
executive officers, investment bankers or other person with actual or apparent
authority to speak for the Board of Directors, inviting, encouraging or
soliciting any proposal (other than from HUB or an affiliate of HUB) which has
as its purpose a tender offer for the shares of Common Stock, a merger,
consolidation, plan of exchange, plan of acquisition or reorganization of SJBDI,
or a sale of a significant number of shares of Common Stock or any significant
portion of its assets or liabilities.
The term "significant portion" means 10% of the assets or
liabilities of SJBDI. The term "significant number" means 10% of the outstanding
shares of Common Stock.
"Publicly Withdrawn", for purposes of clauses (c) and (d)
above, shall mean an unconditional bona fide withdrawal of the Proposal coupled
with a public announcement of no further interest in pursuing such Proposal or
in acquiring any controlling influence over SJBDI or in soliciting or inducing
any other person (other than HUB or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised
at any time (i) in the absence of any required governmental or regulatory
approval or consent, including, without limitation, any filing, approval or
consent required under the rules and regulations of the National Association of
Securities Dealers, Inc., (the "NASD"), necessary for SJBDI to issue the shares
of Common Stock covered by the Option (the "Option Shares") or HUB to exercise
the Option or prior to the expiration or termination of any waiting period
required by law, or (ii) so long as any injunction or other order, decree or
ruling issued by any federal or state court of competent jurisdiction is in
effect which prohibits the sale or delivery of the Option Shares.
SJBDI shall notify HUB promptly in writing of the occurrence
of any Option Triggering Event known to it, it being understood that the giving
of such notice by SJBDI shall not be a condition to the right of HUB to exercise
the Option. SJBDI will not take any action which would have the effect of
preventing or disabling SJBDI from delivering the Option Shares to HUB upon
exercise of the Option or otherwise performing its obligations under this
Agreement, except to the extent required by applicable securities and banking
laws and regulations.
In the event HUB wishes to exercise the Option, HUB shall send
a written notice to SJBDI (the date of which is hereinafter referred to as the
"Option Notice Date") specifying the total number of Option Shares it wishes to
purchase and a place and date between two and ten business days inclusive from
the Option Notice Date for the closing of such a purchase (a "Closing");
provided, however, that a Closing shall not occur prior to two days after the
later of receipt of any necessary regulatory approvals and the expiration of any
legally required notice or waiting period, if any.
3. Grant of Put. HUB hereby grants to SJBDI the right to require HUB to purchase
200,000 shares of Common Stock at the Option Price, on the terms and conditions
set forth herein (the "Put").
4. Exercise of Put. This Put shall be exercisable following the "Put Triggering
Event," which is the termination of the merger agreement by any party thereto.
Upon or after the occurrence of a Put Triggering Event, SJBDI may exercise the
Put, in whole or in part, on one occasion only, within six months after the Put
Triggering Event, subject to the terms and conditions set forth herein and the
termination provisions of Section 22 of this Agreement.
Notwithstanding the foregoing, HUB shall not be obligated to
purchase any Put Shares (i) in the absence of any required governmental or
regulatory approval or consent, including, without limitation, any filing,
approval or consent required under the rules and regulations of the NASD
necessary for SJBDI to issue the shares of Common Stock covered by the Put (the
"Put Shares") or HUB to purchase the Put Shares or prior to the expiration or
termination of any waiting period required by law, or (ii) if as a condition
precedent to obtaining any regulatory approval or consent, HUB is required to
take or refrain from taking any action or to agree to take or refrain from
taking any action which HUB reasonably determines would materially impair the
value of the Put Shares or would impose a material operating or financial burden
on HUB, or (iii) so long as any injunction or other order, decree or ruling
issued by any federal or state court of competent jurisdiction is in effect
which prohibits the sale or delivery of the Put Shares. HUB will make reasonable
efforts promptly to obtain all necessary regulatory approvals upon exercise of
the Put.
HUB will not take any action which would have the effect of
preventing or disabling HUB from purchasing the Put Shares from SJBDI upon
exercise of the Put or otherwise performing its obligations under this
Agreement, except to the extent required by applicable securities and banking
laws and regulations, provided, however, that this paragraph shall not restrict
in any way HUB's ability to negotiate, enter into, or consummate mergers or
acquisitions.
In the event SJBDI wishes to exercise the Put, SJBDI shall
send a written notice (the "Put Notice") to HUB (the date of which is
hereinafter referred to as the "Put Notice Date") specifying the total number of
Put Shares it wishes to sell and a place and date between two and ten business
days inclusive from the Put Notice Date for the closing of such a sale (a
"Closing"); provided, however, that a Closing shall not occur prior to two days
nor more than ten days after the later of receipt of any necessary regulatory
approvals and the expiration of any legally required notice or waiting period,
if any.
5. Payment and Delivery of Certificates. At any Closing hereunder (a) HUB will
make payment to SJBDI of the aggregate price for the Option or Put Shares so
purchased by wire transfer of immediately available funds to an account
designated by SJBDI; (b) SJBDI will deliver to HUB a stock certificate or
certificates representing the number of Option or Put Shares so purchased, free
and clear of all liens, claims, charges and encumbrances of any kind or nature
whatsoever created by or through SJBDI, registered in the name of HUB or its
designee, in such denominations as were specified by HUB in its notice of
exercise and, if necessary, bearing a legend as set forth below; and (c) HUB
shall pay any transfer or other taxes required by reason of the issuance of the
Option or Put Shares so purchased.
If required under applicable federal securities laws, a legend
will be placed on each stock certificate evidencing Option or Put Shares issued
pursuant to this Agreement, which legend will read substantially as follows:
The shares of stock evidenced by this certificate have not been
registered for sale under the Securities Act of 1933 (the "1933 Act").
These shares may not be sold, transferred or otherwise disposed of
unless a registration statement with respect to the sale of such shares
has been filed under the 1933 Act and declared effective or, in the
opinion of counsel reasonably acceptable to SJBDI, said transfer would
be exempt from registration under the provisions of the 1933 Act and
the regulations promulgated thereunder.
No such legend shall be required if a registration statement is filed and
declared effective under Section 6 hereof.
6. Registration Rights. Upon or after the occurrence of an Option Triggering
Event or a Put Exercise and upon receipt of a written request from HUB, SJBDI
shall, if necessary for the resale of the Option or the Option or Put Shares by
HUB, prepare and file a registration statement with the Securities and Exchange
Commission and any state securities bureau covering the Option and such number
of Option or Put Shares as HUB shall specify in its request. SJBDI shall use its
best efforts to cause such registration statement to be declared effective in
order to permit the sale or other disposition of the Option and the Option
Shares or Put Shares, as the case may be, provided that HUB shall in no event
have the right to have more than one such registration statement become
effective, and provided further that SJBDI shall not be required to prepare and
file any such registration statement in connection with any proposed sale with
respect to which counsel to SJBDI delivers to SJBDI and to HUB (which is
reasonably acceptable to HUB) its opinion to the effect that no such filing is
required under applicable laws and regulations with respect to such sale or
disposition; provided further, however, that SJBDI may delay any registration of
Option or Put Shares above for a period not exceeding 90 days in the event that
SJBDI shall in good faith determine that any such registration would adversely
effect an offering of securities by SJBDI for cash. HUB shall provide all
information reasonable requested by SJBDI for inclusion in any registration
statement to be filed hereunder.
In connection with such filing, SJBDI shall use its best
efforts to cause to be delivered to HUB such certificates, opinions,
accountant's letters and other documents as HUB shall reasonably request and as
are customarily provided in connection with registrations of securities under
the Securities Act of 1933, as amended. All expenses incurred by SJBDI in
complying with the provisions of this Section 4, including without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for SJBDI and blue sky fees and expenses shall be paid by SJBDI.
Underwriting discounts and commissions to brokers and dealers relating to the
Option or Put Shares, fees and disbursements of counsel to HUB and any other
expenses incurred by HUB in connection with such registration shall be borne by
HUB. In connection with such filing, SJBDI shall indemnify and hold harmless HUB
against any losses, claims, damages or liabilities, joint or several, to which
HUB may become subject, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
preliminary or final registration statement or any amendment or supplement
thereto, or arise out of a material fact required to be stated therein or
necessary to make the statements therein not misleading; and SJBDI will
reimburse HUB for any legal or other expense reasonably incurred by HUB in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that SJBDI will not be liable in any
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such preliminary or final registration statement or
such amendment or supplement thereto in reliance upon and in conformity with
written information furnished by or on behalf of HUB specifically for use in the
preparation thereof. HUB will indemnify and hold harmless SJBDI to the same
extent as set forth in the immediately preceding sentence but only with
reference to written information specifically furnished by or on behalf of HUB
for use in the preparation of or inclusion in such preliminary or final
registration statement or such amendment or supplement thereto; and HUB will
reimburse SJBDI for any legal or other expense reasonably incurred by SJBDI in
connection with investigating or defending any such loss, claim, damage,
liability or action. Notwithstanding anything to the contrary herein, no
indemnifying party shall be liable for any settlement effected without its prior
written consent.
7. Adjustment Upon Changes in Capitalization. In the event of any change in the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the like,
then the number and kind of Option or Put Shares and the Option Price shall be
appropriately adjusted.
In the event any capital reorganization or reclassification of
the Common Stock, or any consolidation, merger or similar transaction of SJBDI
with another entity, or any sale of all or substantially all of the assets of
SJBDI, shall be effected in such a way that the holders of Common Stock shall be
entitled to receive stock, securities or assets with respect to or in exchange
for Common Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions (in form
reasonably satisfactory to the holder hereof) shall be made whereby the holder
hereof shall thereafter have the right to purchase and receive upon the basis
and upon the terms and conditions specified herein and in lieu of the Common
Stock immediately theretofore purchasable and receivable upon exercise of the
rights represented by the Option, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for the number of shares
of Common Stock immediately theretofore purchasable and receivable upon exercise
of the rights represented by the Option had such reorganization,
reclassification, consolidation, merger or sale not taken place; provided,
however, that if such transaction results in the holders of Common Stock
receiving only cash, the holder hereof shall be paid the difference between the
Option Price and such cash consideration without the need to exercise the
Option.
8. Filings and Consents. Each of HUB and SJBDI will use its reasonable efforts
to make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement.
Exercise of the Option or Put herein provided shall be subject
to compliance with all applicable laws including, in the event HUB is the holder
hereof, approval of the Securities and Exchange Commission, the Board of
Governors of the Federal Reserve System, the Office of Thrift Supervision, the
Federal Deposit Insurance Corporation or the New Jersey Department of Banking,
and each party agrees to cooperate with and furnish to the other such
information and documents as may be reasonably required to secure such
approvals.
9. Representations and Warranties of SJBDI. SJBDI hereby represents and warrants
to HUB as follows:
a. Due Authorization. SJBDI has full corporate power and authority to execute,
deliver and perform this Agreement and all corporate action necessary for
execution, delivery and performance of this Agreement has been duly taken by
SJBDI.
b. Authorized Shares. SJBDI has taken and, as long as the Option is outstanding,
will take all necessary corporate action to authorize and reserve for issuance
all shares of Common Stock that may be issued pursuant to any exercise of the
Option.
c. No Conflicts. Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby (assuming all appropriate
regulatory approvals) will violate or result in any violation or default of or
be in conflict with or constitute a default under any term of the Certificate of
Incorporation or Bylaws of SJBDI or any agreement, instrument, judgment, decree
or order applicable to SJBDI.
10. Representations and Warranties of HUB. HUB hereby represents and warrants to
SJBDI as follows:
a. Due Authorization. HUB has full corporate power
and authority to execute, deliver and perform this Agreement and all corporate
action necessary for execution, delivery and performance of this Agreement has
been duly taken by HUB.
b. No Conflicts. Neither the execution and delivery
of this Agreement nor consummation of the transactions contemplated hereby
(assuming all appropriate regulatory approvals) will violate or result in any
violation or default of or be in conflict with or constitute a default under any
term of the Certificate of Incorporation or Bylaws of HUB or any agreement,
instrument, judgment, decree or order applicable to HUB.
11. Specific Performance. The parties hereto acknowledge that damages would be
an inadequate remedy for a breach of this Agreement and that the obligations of
the parties hereto shall be specifically enforceable. Notwithstanding the
foregoing, each party shall have the right to seek money damages against the
other for a breach of this Agreement.
12. Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof and supersedes all other
prior agreements and understandings, both written and oral, among the parties or
any of them with respect to the subject matter hereof.
13. Assignment or Transfer. Neither party may sell, assign or otherwise transfer
its rights and obligations hereunder, in whole or in part, to any person or
group of persons, except that HUB may transfer its rights hereunder to an
affiliate. HUB represents that it is acquiring the Option for HUB's own account
and not with a view to or for sale in connection with any distribution of the
Option or the Option Shares. HUB is aware that neither the Option nor the Option
or Put Shares are the subject of a registration statement filed with, and
declared effective by, the Securities and Exchange Commission pursuant to
Section 5 of the Securities Act, but instead each is being offered in reliance
upon the exemption from the registration requirement provided by Section 4(2)
thereof and the representations and warranties made by HUB in connection
therewith.
14. Amendment of Agreement. Upon mutual consent of the parties hereto, this
Agreement may be amended in writing at any time, for the purpose of facilitating
performance hereunder or to comply with any applicable regulation of any
governmental authority or any applicable order of any court or for any other
purpose.
15. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
16. Notices. All notices, requests, consents and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given when delivered personally, by express service, cable, telegram or telex,
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties as follows:
If to HUB:
Xxxxxx United Bancorp
0000 XxxXxxxxx Xxxxxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: 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 SJBDI:
Southern Jersey Bancorp of Delaware, Inc.
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxx X. XxXxxxxxx, Xx.
Chairman and Chief Executive Officer
With a copy to:
Block & Xxxxxxxx, P.C.
00000 Xxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Block, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
18. Captions. The captions in the Agreement are inserted for convenience and
reference purposes, and shall not limit or otherwise affect any of the terms or
provisions hereof.
19. Waivers and Extensions. The parties hereto may, by mutual consent, extend
the time for performance of any of the obligations or acts of either party
hereto. Each party may waive (a) compliance with any of the covenants of the
other party contained in this Agreement and/or (b) the other party's performance
of any of its obligations set forth in this Agreement.
20. Parties in Interest. This Agreement shall be binding upon and inure solely
to the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
21. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
22. Termination. This Agreement shall terminate upon either the termination of
the Merger Agreement as provided therein or the consummation of the transactions
contemplated by the Merger Agreement; provided, however, that (i) if termination
of the Merger Agreement occurs after the occurrence of an Option Triggering
Event (as defined in Section 2 hereof), this Agreement shall not terminate until
the later of 24 months following the date of the termination of the Merger
Agreement or the consummation of any proposed transactions which constitute the
Triggering Event and (ii) if termination of the Merger Agreement occurs pursuant
to a Put Triggering Event (as defined in Section 4 hereof), this Agreement shall
terminate six 6 months after such Put Triggering Event, unless the Put Notice
has been delivered prior thereto, in which case this Agreement shall terminate
following the Closing under such Put Notice.
23. Cut-Back. Notwithstanding anything to the contrary contained herein, the
number of shares of Common Stock subject to the Option and the Put shall be
automatically reduced if, and only to the extent, necessary to avoid HUB
becoming (either by virtue of the execution and delivery of this Agreement or by
virtue of the exercise of the Option or Put) an "Acquiring Person" under the
Amended Stockholders Rights Agreement dated as of April 11, 1996 by and between
SJBDI and The Farmers and Merchants National Bank of Bridgeton.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to
resolutions adopted by its Board of Directors, has caused this Stock Option
Agreement to be executed by its duly authorized officer, all as of the day and
year first above written.
SOUTHERN JERSEY BANCORP
OF DELAWARE, INC.
XXXXXXXX X. XxXXXXXXX, XX.
By:-------------------------------------
Xxxxxxxx X. XxXxxxxxx, Xx.
Chairman & Chief Executive Officer
XXXXXX UNITED BANCORP
X. XXXX VAN BORKULO-XXXXX
By:-------------------------------------
X. Xxxx Van Borkulo-Xxxxx
Executive Vice-President
