Exhibit 99.1
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Option Agreement"), dated as of
February , 1997, is by and between PORTSMOUTH BANK SHARES, INC.
("Portsmouth"), a New Hampshire corporation, and CFX CORPORATION ("CFX"), a New
Hampshire corporation.
WITNESSETH
WHEREAS, the respective Boards of Directors of Portsmouth and CFX have
approved a Plan of Share Exchange (the "Plan of Exchange"), and the respective
Boards of Directors of Portsmouth, Portsmouth Savings Bank, a New Hampshire
state-chartered savings bank subsidiary of Portsmouth, CFX and CFX Bank, a New
Hampshire state-chartered savings bank subsidiary of CFX, have approved an
Agreement and Plan of Reorganization (the "Reorganization Agreement") and an
Agreement and Plan of Merger (the "Plan of Merger" and, together with the Plan
of Exchange, the Reorganization Agreement and certain other agreements
contemplated by the Reorganization Agreement, the "Transaction Documents"),
providing for certain transactions pursuant to which CFX would acquire all the
outstanding capital stock of Portsmouth through a share exchange, Portsmouth
would be merged with and into CFX, and Portsmouth Savings Bank, a wholly-owned
New Hampshire state-chartered savings bank subsidiary of Portsmouth, would be
merged with and into CFX Bank, a wholly-owned New Hampshire state-chartered
savings bank subsidiary of CFX (collectively, the "Transactions");
WHEREAS, as a condition to CFX's entry into the Transaction Documents and
the Transactions, and to induce such entry, Portsmouth has agreed to grant CFX
the option set forth herein to purchase authorized but unissued shares of
Portsmouth Common Stock;
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Certain Definitions.
(a) Capitalized terms used but not defined herein shall have the
same meanings as in the Transaction Documents.
(b) The term "Effective Date" shall have the meaning specified in
the Reorganization Agreement.
(c) The term "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 Portsmouth, any Portsmouth 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 Portsmouth (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) The term "Purchase Event" shall mean any of the following events
or transactions occurring after the date hereof:
(1) any person (other than Portsmouth, any Portsmouth
subsidiary, CFX, or any CFX affiliate) shall have commenced a bona fide tender
or exchange offer to purchase shares of Portsmouth Common Stock such that upon
consummation of such offer such person would own or control 10 percent or more
of the outstanding shares of Portsmouth Common Stock;
(2) any person (other than Portsmouth, any Portsmouth
subsidiary, CFX, or any CFX affiliate), 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 Portsmouth or any Portsmouth subsidiary, (ii) purchase, lease
or otherwise acquire all or substantially all the assets of Portsmouth or any
Portsmouth 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 Portsmouth or any
Portsmouth subsidiary;
(3) any person (other than Portsmouth, any Portsmouth
subsidiary, subsidiaries of Portsmouth 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 Portsmouth 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 Portsmouth, any Portsmouth
subsidiary, CFX or any CFX affiliate) shall have made a bona fide proposal to
Portsmouth by public announcement or written communication that is or becomes
the subject of public disclosure to (i) acquire Portsmouth or any Portsmouth
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) Portsmouth shall have willfully breached any Specified
Covenant (as defined below), which breach would entitle CFX to terminate the
Transaction Documents (without regard to the cure periods
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provided for therein) and such breach shall not have been cured prior to the
Notice Date (as defined below).
(e) The term "Repurchase Event" shall mean any of the following:
(1) any person (other than Portsmouth, any Portsmouth
subsidiary, CFX, or any CFX affiliate) shall have acquired beneficial ownership
of 25 percent or more of the outstanding shares of Portsmouth 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 Portsmouth or any Portsmouth subsidiary to (i) merge or
consolidate, or enter into any similar transaction, with Portsmouth or any
Portsmouth subsidiary, (ii) purchase, lease or otherwise acquire all or
substantially all the assets of Portsmouth or any Portsmouth 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 Portsmouth or any Portsmouth subsidiary.
(f) The term "Specified Covenant" shall mean any covenant contained
in Sections 4.1, 4.2, 4.3, 4.4 or 4.8 or subsections (2), (3), (4), (5), (6),
(7), (12), (17) and, to the extent applicable to the foregoing subsections, (18)
of Section 4.7(b) of the Reorganization Agreement.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Portsmouth hereby grants to CFX an option (the "Option") to purchase up to
1,142,000 shares of Portsmouth Common Stock at a price of $15.75 per share
payable in cash as provided in Section 4 hereof; provided, however, that in the
event Portsmouth issues or agrees to issue any shares of Portsmouth Common Stock
in breach of its obligations under the Transaction Documents at a price less
than $15.75 per share (as adjusted pursuant to Section 6 hereof), the exercise
price shall be equal to such lesser price.
3. Exercise of Option.
(a) If not then in material breach of the Transaction Documents, CFX
may exercise the Option, in whole or part, at any time or from time to time if a
Purchase Event 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,
(ii) termination of the Transaction Documents in accordance with the terms of
the Reorganization Agreement before the occurrence of a Purchase Event (other
than a termination resulting from a willful breach by Portsmouth or Portsmouth
Bank of any Specified Covenant contained in the Transaction Documents),
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or (iii) six months after the termination of the Transaction Documents if such
termination follows the occurrence of a Purchase Event or is due to a willful
material breach by Portsmouth or Portsmouth Bank of any Specified Covenant
contained in the Transaction Documents; and provided further that any such
exercise shall be subject to compliance with applicable provisions of law.
(b) If more than one of the transactions giving rise to a Purchase
Event 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.
(c) In the event CFX wishes to exercise the Option, it shall send to
Portsmouth a written notice (the date of which being herein referred to as the
"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 (the "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.
(a) At the closing referred to in Section 3 hereof, CFX shall pay to
Portsmouth the aggregate purchase price for the shares of Portsmouth Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by a wire transfer to a bank account designated by Portsmouth.
(b) At such closing, simultaneously with the delivery of cash as
provided in subsection (a), Portsmouth shall deliver to CFX a certificate or
certificates representing the number of shares of Portsmouth Common Stock
purchased by CFX, and CFX shall deliver to Portsmouth 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 Portsmouth 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
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registered holder hereof and Portsmouth Bank Shares, Inc. 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 Portsmouth Bank Shares, Inc. A copy of such
agreement will be provided to the holder hereof without charge
upon receipt by Portsmouth Bank Shares, Inc. 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
Portsmouth a copy of a letter from the staff of the SEC, or an opinion of
counsel, in form and substance satisfactory to Portsmouth, 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. Portsmouth hereby represents, warrants and covenants
to CFX as follows:
(a) Portsmouth shall at all times maintain sufficient authorized but
unissued shares of Portsmouth Common Stock so that the Option may be exercised
without authorization of additional shares of Portsmouth 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 change
in Portsmouth 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 Portsmouth 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 Portsmouth 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 Portsmouth 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 Portsmouth to
breach any provision of the Transaction Documents.
7. Registration Rights. Portsmouth shall, if requested by CFX, as
expeditiously as possible file a registration statement on a form of general use
and available for use by Portsmouth under the Securities Act if necessary in
order to permit or assist the sale or other disposition of the shares of
Portsmouth 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. CFX shall provide all information reasonably requested by Portsmouth for
inclusion in any registration
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statement to be filed hereunder. Portsmouth will use its best efforts to cause
such registration statement first to become effective and then to remain
effective for such period not in excess of 270 days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sales or other dispositions. The obligations of Portsmouth hereunder
to file a registration statement and to maintain its effectiveness may be
suspended for one or more periods of time not exceeding 60 days in the aggregate
if the Board of Directors of Portsmouth shall have determined that the filing of
such registration statement or the maintenance of its effectiveness would
require disclosure of non-public information that would materially and adversely
affect Portsmouth. The first registration statement prepared under this Section
7 shall be at Portsmouth's expense except for underwriting commissions and the
fees and disbursements of CFX's counsel attributable to the offering of
Portsmouth Common Stock by CFX. The preparation of a second registration
statement may be requested and effected hereunder at CFX's sole expense. In no
event shall Portsmouth be required to effect more than two registrations
hereunder. The filing of any registration statement hereunder may be delayed for
such period of time as may reasonably be required to facilitate any public
distribution by Portsmouth of Portsmouth Common Stock. If requested by CFX in
connection with any registration, Portsmouth 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 Portsmouth
and CFX will also agree to indemnify each other on customary terms with respect
to any information provided by such party.
8. Repurchase.
(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 and ending nine months thereafter (the
"Repurchase Period"), Portsmouth 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 Portsmouth 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
Portsmouth Common Stock acquired pursuant to the Option;
(2) the difference between (A) the "market/tender offer" price
for shares of Portsmouth 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 Portsmouth Common Stock within that
portion of the Repurchase Period preceding the date CFX gives notice of the
required repurchase under this
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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 Portsmouth 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 Portsmouth 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 Transaction Documents, 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,
Portsmouth shall, within thirty business days thereafter, pay the required
amount to CFX in immediately available funds and CFX shall surrender to
Portsmouth the Option and the certificates evidencing the shares of Portsmouth
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 any
federal or state regulatory agency is required in connection with such purchase,
Portsmouth 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.
9. Severability. If any term, provision, covenant or restriction
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 Portsmouth to repurchase the full number of
shares of Portsmouth Common Stock provided in Section 2 hereof (as adjusted
pursuant to Section 6 hereof), it is the express intention of Portsmouth to
allow the holder to acquire or to require Portsmouth to repurchase such lesser
number of shares as may be permissible, without any amendment or modification
hereof.
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10. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the
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 herein,
this Option Agreement and the Transaction Documents 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, this Agreement and the Transaction Documents 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 Portsmouth
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 and 8 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 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
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 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.
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(g) Governing Law. This Option Agreement shall be governed by and
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.
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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: _____________________________________
Xxxxx X. Xxxxxx,
President and Chief Executive Officer
PORTSMOUTH BANK SHARES, INC.
By: _____________________________________
Xxxxx X. Xxxx
President and Chief Executive Officer
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