EXHIBIT 99.3
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.
MS\ 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.
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
By: /s/ Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx, President
HUBCO, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx, President
and Chief Executive Officer
