STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated as of March 2,
1998, is by and between HUBCO, Inc., a New Jersey corporation and registered
bank holding company ("HUBCO"), and COMMUNITY FINANCIAL HOLDING CORPORATION, a
New Jersey corporation and registered bank holding company ("CFHC").
BACKGROUND
WHEREAS, HUBCO and CFHC, as of the date hereof, are prepared
to execute a definitive agreement and plan of merger (the "Merger Agreement")
pursuant to which CFHC will be merged with and into HUBCO (the "Merger"); and
WHEREAS, HUBCO has advised CFHC that it will not execute the
Merger Agreement unless CFHC executes this Agreement; and
WHEREAS, the Board of Directors of CFHC has determined that
the Merger Agreement provides substantial benefits to the shareholders of CFHC;
and
WHEREAS, as an inducement to HUBCO to enter into the Merger
Agreement and in consideration for such entry, CFHC desires to grant to HUBCO an
option to purchase authorized but unissued shares of common stock of CFHC 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 CFHC,
intending to be legally bound hereby, agree:
1. Grant of Option. CFHC hereby grants to HUBCO the
option to purchase 252,790 shares of common stock, $5.00 par value, of CFHC (the
"Common Stock") at a price of $24.40 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 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 CFHC pursuant to which such person or
any affiliate of such person would (i) merge or consolidate, or enter into any
similar transaction, with CFHC, (ii) acquire all or a significant portion of the
assets or liabilities of CFHC, 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 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, CFHC or any other business
combination involving CFHC, 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 shareholders of CFHC called to vote on the Merger and
CFHC's shareholders fail to approve the Merger by the vote required by
applicable law at the meeting of shareholders called for such purpose; or
d. makes a bona fide Proposal and thereafter,
but before such Proposal has been Publicly Withdrawn, CFHC 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 CFHC or any of its directors, senior
executive officers, investment bankers or other person with actual or apparent
authority to speak for the CFHC Board of Directors, 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 CFHC, or a sale of a significant number of shares of Common
Stock or any significant portion of its assets or liabilities (any of the
foregoing, an "Insider Action"); provided, that such Insider Action shall not
constitute a Triggering Event if (i) promptly but in any event within 24 hours
after the Insider Action occurs, CFHC so notifies HUBCO in a writing which
describes the Insider Action in reasonable detail, (ii) promptly but in any
event within 48 hours after HUBCO requests in writing, CFHC takes all actions
which HUBCO reasonably requests in order to ameliorate any actual or potential
negative effects of the Insider Action, and (iii) the Insider Action does not
actually have an adverse effect on HUBCO or on the ability of HUBCO or CFHC to
consummate the Merger or to do so in a timely manner.
The term "significant portion" means 25% of the assets or
liabilities of CFHC. 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 CFHC or in soliciting or inducing
any other person (other than HUBCO or any affiliate of HUBCO) 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 CFHC 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, or (iii) if at any time between the
exercise of the Option and the issuance of the Option Shares, HUBCO has breached
in a material respect any of the material covenants of the Merger Agreement
which remain applicable to it.
CFHC 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 CFHC shall not be a condition to the right of HUBCO to exercise the
Option. CFHC will not take any action which would have the effect of preventing
or disabling CFHC 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 CFHC (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 CFHC of the aggregate price for the
Option Shares so purchased by wire transfer of immediately available funds to an
account designated by CFHC; (b) CFHC 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 CFHC, registered in the name of HUBCO or its
designee, in such denominations as were specified by HUBCO in its notice of
exercise and 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.
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 COMMUNITY FINANCIAL HOLDING
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, CFHC 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 CFHC 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 CFHC shall
not be required to prepare and file any such registration statement in
connection with any proposed sale with respect to which counsel to CFHC delivers
to CFHC and to HUBCO its opinion (which is reasonably acceptable to HUBCO) 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 CFHC
may delay any registration of Option Shares above for a period not exceeding 90
days in the event that CFHC shall in good faith determine that any such
registration would adversely effect an offering of securities by CFHC for cash.
HUBCO shall provide all information reasonable requested by CFHC for inclusion
in any registration statement to be filed hereunder.
In connection with such filing, CFHC 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 reasonable expenses incurred by CFHC
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 CFHC and blue sky fees and expenses shall be paid
by CFHC. 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, CFHC 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 the omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading; and CFHC
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 CFHC 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 CFHC 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 CFHC for any
legal or other expense reasonably incurred by CFHC 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 CFHC
with another entity, or any sale of all or substantially all of the assets of
CFHC, 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 CFHC 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 Comptroller of the
Currency, the Federal Deposit Insurance Corporation or the New Jersey Department
of Banking and Insurance, and CFHC 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 CFHC. CFHC
hereby represents and warrants
to HUBCO as follows:
a. Due Authorization. CFHC 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 CFHC.
b. Authorized Shares. CFHC 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 CFHC or any agreement,
instrument, judgment, decree or order applicable to CFHC.
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 CFHC for a breach of this Agreement.
9. Entire Agreement. This Agreement and the Merger
Agreement constitute 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 a wholly-owned subsidiary 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 are 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, XX 00000
Attn.: Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
With a copy to:
HUBCO, Inc.
0000 XxxXxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Attn.: X. Xxxx Van Borkulo-Xxxxx, Esq.
Executive Vice President and General Counsel
Pitney, Xxxxxx, Xxxx & Xxxxx
000 Xxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attn.: Xxxxxx X. Xxxxx, Esq.
Xxxxxxx X. Xxxxxxx, Esq.
If to CFHC:
Community Financial Holding Corporation
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn.: Xxxxxx X. Xxxxxx
Chairman
With a copy to:
Xxxxxxx & Xxx
0000 Xxxxx 00 Xxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Attn.: Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx X. Xxxxx, 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) and the Merger Agreement
has not been terminated by CFHC due to a material breach by HUBCO of a material
covenants of the Merger Agreement applicable to HUBCO, 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.
COMMUNITY FINANCIAL HOLDING CORPORATION
XXXXXX X. BENMILLER
By:-------------------------------------
Xxxxxx X. Benmiller, President
HUBCO, INC.
XXXXXXX X. XXXXXXX
By:-------------------------------------
Xxxxxxx X. Xxxxxxx, President and
Chief Executive Officer
