STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Option Agreement"), dated as of February 9,
1996, is by and between MILFORD CO-OPERATIVE BANK ("Milford"), a New Hampshire
state chartered co-operative bank, and CFX CORPORATION ("CFX"), a New Hampshire
corporation.
WITNESSETH
WHEREAS, the Boards of Directors of Milford and CFX have approved an
Agreement and Plan of Merger ("Merger Agreement") and an Agreement and Plan of
Reorganization ("Reorganization Agreement"), providing for certain transactions
pursuant to which Milford would be merged with and into CFX Bank ("Bank"), a New
Hampshire state chartered savings bank subsidiary of CFX.
WHEREAS, as a condition to CFX's entry into the Merger Agreement and the
Reorganization Agreement and to induce such entry, Milford has agreed to grant
to CFX the option set forth herein to purchase authorized but unissued shares of
Milford Common Stock;
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Definitions. Capitalized terms defined in the Merger Agreement and/or
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the Reorganization Agreement and used herein shall have the same meanings as in
the Merger Agreement, the Reorganization Agreement, or both, as the case may be.
2. Grant of Option. Subject to the terms and conditions set forth
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herein, Milford hereby grants to CFX an option ("Option") to purchase up to
131,300 shares of Milford Common Stock, at a price of $30 per share payable in
cash as provided in Section 4 hereof; provided, however, that in the event
Milford issues or agrees to issue any shares of Milford Common Stock in breach
of its obligations under the Merger Agreement at a price less than $30 per share
(as adjusted pursuant to Section 6 hereof), the exercise price shall be equal to
such lesser price.
3. Exercise of Option.
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(a) If not then in material breach of the Reorganization Agreement,
CFX may exercise the Option, in whole or part, at any time or from time to time
if a Purchase Event (as defined below) shall have occurred and be continuing;
provided that to the extent the Option shall not have been exercised, it shall
terminate and be of no further force and effect upon the earliest to occur of
(i) the Effective Date of the Merger or (ii) termination of the Merger Agreement
or the Reorganization Agreement in accordance with the provisions thereof prior
to the occurrence of a Purchase Event (other than a termination resulting from a
willful breach by Milford of any covenant contained therein) or (iii) six months
after termination of the Merger Agreement or the Reorganization Agreement if
such termination follows the occurrence of a Purchase Event or is due to a
willful material breach by Milford of any covenant contained therein; and
provided further that any such exercise shall be subject to compliance with
applicable provisions of law.
(b) As used herein, a "Purchase Event" shall mean any of the
following events or transactions:
(1) any person (other than Milford, any Milford subsidiary,
CFX, or any CFX affiliate) shall have commenced a bona fide tender or exchange
offer to purchase shares of Milford Common Stock such that upon consummation of
such offer such person would own or control 10 percent or more of the
outstanding shares of Milford Common Stock;
(2) any person (other than Milford or any Milford
subsidiary), other than in connection with a transaction to which CFX has given
its prior written consent, shall have filed an application or notice with any
federal or state regulatory agency for clearance or approval, to (i) merge or
consolidate, or enter into any similar transaction, with Milford or any Milford
subsidiary, (ii) purchase, lease or otherwise acquire all or substantially all
the assets of Milford or any Milford subsidiary, or (iii) purchase or otherwise
acquire (including by way of merger, consolidation, share exchange or any
similar transaction) securities representing 10 percent or more of the voting
power of Milford or any Milford subsidiary;
(3) any person (other than Milford, any Milford subsidiary,
subsidiaries of Milford in a fiduciary capacity, CFX, affiliates of CFX, or
subsidiaries of CFX in a fiduciary capacity) shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 10 percent or more of
the outstanding shares of Milford Common Stock (the term "beneficial ownership"
for purposes of this Option Agreement having the meaning assigned thereto in
Section 13(d) of the Exchange Act and the regulations promulgated thereunder);
(4) any person (other than Milford, any Milford subsidiary,
CFX or any CFX affiliate) shall have made a bona fide proposal to Milford by
public announcement or written communication that is or becomes the subject of
public disclosure to (i) acquire Milford or any Milford subsidiary by merger,
consolidation, purchase of all or substantially all its assets or any other
similar transaction, or (ii) make an offer described in clause (1) above; or
(5) Milford shall have willfully breached any covenant
contained in the Merger Agreement or the Reorganization Agreement, which breach
would entitle CFX to terminate the Merger Agreement or the Reorganization
Agreement (without regard to the cure periods provided for therein) and such
breach shall not have been cured prior to the Notice Date (as defined below).
(c) If more than one of the transactions giving rise to a Purchase
Event under Section 3(b) is undertaken or effected, then all such transactions
shall give rise only to one Purchase Event, which Purchase Event shall be deemed
continuing for all purposes hereunder until all such transactions are abandoned.
As used in this Option Agreement, "person" shall have the meanings specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act, and shall also include
persons (other than Milford, any Milford subsidiary, CFX, or any CFX affiliate),
who have entered into an agreement, arrangement or understanding (whether or not
in writing), or who are acting in concert or with conscious parallel behavior,
for the purpose of acquiring, holding, voting or disposing of any voting
securities of Milford (except pursuant solely to a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the Exchange Act and the
regulations promulgated thereunder).
(d) In the event CFX wishes to exercise the Option, it shall send
to Milford a written notice (the date of which being herein referred to as
"Notice Date") specifying (i) the total number of shares it will purchase
pursuant to such exercise, and (ii) a place and date not earlier than three
business days nor later than 30 business days from the Notice Date for the
closing of such purchase ("Closing Date"); provided that, if prior notification
to or approval of any federal or state regulatory agency is required in
connection with such purchase, CFX shall promptly file the required notice or
application for approval and shall expeditiously process the same and the period
of time that otherwise would run pursuant to this sentence shall run instead
from the date on which any required notification period has expired or been
terminated or such approval has been obtained and any requisite waiting period
shall have passed.
4. Payment and Delivery of Certificates.
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(a) At the closing referred to in Section 3 hereof, CFX shall pay
to Milford the aggregate purchase price for the shares of Milford Common Stock
purchased pursuant to the exercise of the Option in immediately available funds
by a wire transfer to a bank account designated by Milford.
(b) At such closing, simultaneously with the delivery of cash as
provided in subsection (a), Milford shall deliver to CFX a certificate or
certificates representing the number of shares of Milford Common Stock purchased
by CFX, and CFX shall deliver to Milford a letter agreeing that CFX will not
offer to sell, pledge or otherwise dispose of such shares in violation of
applicable law or the provisions of this Option Agreement.
(c) Certificates for Milford Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend which shall read
substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof
and Milford Co-operative Bank and to resale restrictions arising under the
Securities Act of 1933, as amended, a copy of which agreement is on file
at the principal office of Milford Co-operative Bank. A copy of such
agreement will be provided to the holder hereof without charge upon
receipt by Milford Co-operative Bank of a written request."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if CFX shall have delivered to
Milford a copy of a letter from the staff of the Commission, or an opinion of
counsel, in form and substance satisfactory to Milford, to the effect that such
legend is not required for purposes of the Securities Act and any applicable
state securities laws and this Option Agreement.
5. Representations. Milford hereby represents, warrants and covenants
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to CFX as follows:
(a) Milford shall at all times maintain sufficient authorized but
unissued shares of Milford Common Stock so that the Option may be exercised
without authorization of additional shares of Milford Common Stock.
(b) The shares to be issued upon due exercise, in whole or in part,
of the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable.
6. Adjustment Upon Changes in Capitalization. In the event of any
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change in Milford Common Stock by reason of stock dividends, split-ups,
recapitalizations, combinations, exchanges of shares or the like, the type and
number of shares subject to the Option, and the purchase price per share, as the
case may be, shall be adjusted appropriately. In the event that any additional
shares of Milford Common Stock are issued or otherwise become outstanding after
the date of this Option Agreement (other than pursuant to this Option
Agreement), the number of shares of Milford Common Stock subject to the Option
shall be adjusted so that, after such issuance, it equals 19.99 percent of the
number of shares of Milford Common Stock then issued and outstanding without
giving effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 6 shall be deemed to authorize Milford to breach any
provision of the Merger Agreement or the Reorganization Agreement.
7. Registration Rights. Milford shall, if requested by CFX, as
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expeditiously as possible file an offering circular on a form of general use, if
any, under the rules and regulations of the Office of Thrift Supervision ("OTS")
if necessary in order to permit or assist the sale or other disposition of the
shares of Milford Common Stock that have been acquired upon exercise of the
Option in accordance with the intended method of sale or other disposition
requested by CFX (it being understood and agreed that any such sale or other
disposition shall be effected on a widely distributed basis so that, to the
extent practicable, upon consummation thereof, no purchaser or transferee shall
beneficially own more than five percent of the shares of Milford Common Stock
then outstanding). CFX shall provide all information reasonably requested by
Milford for inclusion in any offering circular to be filed hereunder. If
required, Milford will use its best efforts to cause such offering circular
first to become effective and then to remain effective for such period not in
excess of 180 days from the day such offering circular first becomes effective
as may be reasonably necessary to effect such sales or other dispositions. The
first offering circular prepared under this Section 7 shall be at Milford's
expense except for underwriting commissions and the fees and disbursements of
CFX's counsel attributable to the offering of Milford Common Stock by CFX. The
preparation of a second offering circular may be requested and effected
hereunder at CFX's sole expense. In no event shall Milford be required to
prepare more than two offering circulars hereunder. If requested by CFX in
connection with any preparation of any offering circular, Milford will become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements for parties similarly situated. In any such transaction
Milford and CFX will also agree to indemnify each other on customary terms with
respect to any information provided by such party.
8. Repurchase.
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(a) Subject to the giving of any notices and the receipt of any
required approvals, at the request of CFX at any time commencing upon the
occurrence of a Repurchase Event (as defined in subsection (c) below) and ending
nine months thereafter ("Repurchase Period"), Milford shall repurchase the
Option (but not later than the termination of the Option pursuant to Section
3(a) hereof) from CFX together with any shares of Milford Common Stock purchased
by CFX pursuant thereto with respect to which CFX then has beneficial ownership,
at a price (per share, the "Per Share Repurchase Price") equal to the sum of:
(1) the exercise price paid by CFX for any shares of Milford
Common Stock acquired pursuant to the Option;
(2) the difference between (A) the "market/tender offer"
price for shares of Milford Common Stock (defined as the higher of (x) the
highest price per share at which a tender or exchange offer has been made or (y)
the highest reported sale price for shares of Milford Common Stock within that
portion of the Repurchase Period preceding the date CFX gives notice of the
required repurchase under this Section 8) and (B) the exercise price as
determined pursuant to Section 2 hereof (subject to adjustment as provided in
Section 6) multiplied by the number of shares of Milford Common Stock with
respect to which the Option has not been exercised, but only if the
market/tender offer price is greater than such exercise price;
(3) the difference between the market/tender offer price (as
defined in Section 8(a)(2) hereof) and the exercise price paid by CFX for any
shares of Milford Common Stock purchased pursuant to the exercise of the Option,
multiplied by the number of shares so purchased, but only if the market/tender
offer price is greater than such exercise price; and
(4) CFX's out-of-pocket expenses incurred in connection with
the transactions contemplated by the Merger Agreement or the Reorganization
Agreement, including without limitation legal, accounting and investment banking
fees, in an amount not to exceed $500,000.
(b) In the event CFX exercises its rights under this Section 8,
Milford shall, within thirty business days thereafter, pay the required amount
to CFX in immediately available funds and CFX shall surrender to Milford the
Option and the certificates evidencing the shares of Milford Common Stock
purchased thereunder and CFX shall warrant that it owns such shares and that the
same are then free and clear of all liens, charges, claims, restrictions and
encumbrances; provided that, if prior notification to the Office of Thrift
Supervision or any other federal or state regulatory agency is required in
connection with such purchase, Milford shall promptly file the required notice
or application for approval and shall expeditiously process the same and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification period has expired or
been terminated or such approval has been obtained and any requisite waiting
period shall have passed.
(c) A "Repurchase Event" shall mean any of the following:
(1) any person (other than Milford, any Milford subsidiary,
CFX, or any CFX affiliate) shall have acquired beneficial ownership of
25 percent or more of the outstanding shares of Milford Common Stock; or
(2) any person (other than CFX or any CFX affiliate) shall
have entered into an agreement, arrangement or understanding (whether or not in
writing) with Milford or any Milford subsidiary to (i) merge or consolidate, or
enter into any similar transaction, with Milford or any Milford subsidiary,
(ii) purchase, lease or otherwise acquire all or substantially all the assets of
Milford or any Milford subsidiary, or (iii) purchase or otherwise acquire
(including by way of merger, consolidation, share exchange or any similar
transaction) securities representing 25 percent or more of the voting power of
Milford or any Milford subsidiary.
9. Repurchase at Option of Milford and First Refusal.
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(a) Except to the extent that CFX shall have previously exercised
its rights under Section 8, at the written request of Milford during the six
month period commencing nine months following the first occurrence of a Purchase
Event, Milford may repurchase from CFX, and CFX shall sell to Milford, all the
Milford Common Stock acquired by CFX pursuant hereto and with respect to which
CFX has beneficial ownership at the time of such repurchase at a price per share
equal to the greater of (i) the Per Share Repurchase Price or (ii) the sum of
(A) the aggregate purchase price of the shares so repurchased plus (B) interest
on the aggregate purchase price paid for the shares so repurchased from the date
of purchase to the date of repurchase at the highest rate of interest announced
by CFX as its prime or base lending or reference rate during such period, less
any dividends received on the shares so repurchased. Any repurchase under this
Section 9(a) shall be consummated in accordance with Section 8(b); provided,
however, that CFX, within 30 days following Milford's written request to
repurchase under this Section 9(a), may deliver an Offeror's Notice pursuant to
Section 9(b) hereof, in which case the provisions of Section 9(b) shall control,
and provided further that Milford's rights under this Section 9(a) shall be
suspended (with any such rights being extended accordingly) during the period
that the transaction(s) contemplated by the Offeror's Notice shall be pending.
(b) If, at any time after the occurrence of a Purchase Event and
prior to the earlier of (i) the expiration of 18 months immediately following
such Purchase Event or (ii) the expiration or termination of the Option, CFX
shall desire to sell, assign, transfer or otherwise dispose of the Option or all
or any of the shares of Milford Common Stock acquired by it pursuant to the
Option, it shall give Milford written notice of the proposed transaction (an
"Offeror's Notice"), identifying the proposed transferees, and setting forth the
terms of the proposed transaction. An Offeror's Notice shall be deemed an offer
by CFX to Milford, which may be accepted within 10 business days of the receipt
of such Offeror's Notice, on the same terms and conditions and at the same price
at which CFX is proposing to transfer the Option or such shares to a third
party. The purchase of the Option or any such shares by Milford shall be closed
within 10 business days of the date of the acceptance of the offer and the
purchase price shall be paid to CFX by wire transfer of immediately available
funds to an account designated by CFX. In the event of the failure or refusal
of Milford to purchase the Option or all the shares covered by the Offeror's
Notice or if the OTS or any other federal or state regulatory authority
disapproves Milford's proposed purchase of the Option or such shares, CFX may,
within 60 days from the date of the Offeror's Notice, sell all, but not less
than all, of the Option or such shares to such third party at no less than the
price specified and on terms no more favorable to the purchaser than those set
forth in the Offeror's Notice. The requirements of this Section 9(b) shall not
apply to (i) any disposition as a result of which the proposed transferees would
beneficially own not more than two percent of the voting power of Milford or
(ii) any disposition of Milford Common Stock by a person to whom CFX has sold
shares of Milford Common Stock issued upon exercise of the Option.
10. Severability. If any term, provision, covenant or restriction
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contained in this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Option Agreement shall remain in full force and
effect, and shall in no way be affected, impaired or invalidated. If for any
reason such court or regulatory agency determines that the Option will not
permit the holder to acquire or Milford to repurchase the full number of shares
of Milford Common Stock provided in Section 2 hereof (as adjusted pursuant to
Section 6 hereof), it is the express intention of Milford to allow the holder to
acquire or to require Milford to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
11. Miscellaneous.
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(a) Expenses. Except as otherwise provided herein, each of the
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parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) Entire Agreement. Except as otherwise expressly provided
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herein, this Option Agreement, the Reorganization Agreement and the Merger
Agreement contain the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Notwithstanding anything
to the contrary contained in this Agreement, the Merger Agreement or the
Reorganization Agreement, this Agreement shall be deemed to amend the
Confidentiality Agreement so as to permit CFX to enter into this Agreement and
exercise all its rights hereunder, including its right to acquire Milford Common
Stock upon exercise of the Option. The terms and conditions of this Option
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. Nothing in this Option Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Option
Agreement, except as expressly provided herein.
(c) Assignment. Other than as provided in Sections 7, 8 and 9
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hereof, neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party.
(d) Notices. All notices or other communications which are
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required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by overnight express or by registered or certified mail,
postage prepaid, addressed as provided in the Reorganization Agreement. A party
may change its address for notice purposes by written notice to the other party
hereto.
(e) Counterparts. This Option Agreement may be executed in any
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number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties agree that damages would be
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an inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and
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construed in accordance with the laws of New Hampshire applicable to agreements
made and entirely to be performed within such state and such federal laws as may
be applicable.
[Remainder of page left intentionally blank; signatures appear on next page.]
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
CFX CORPORATION
By: /s/
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Xxxxx X. Xxxxxx,
President and Chief Executive Officer
MILFORD CO-OPERATIVE BANK
By: /s/
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Xxxxxxx X. X'Xxxxx
President and Chief Executive Officer
