STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated June 25, 1998,
is by and between United National Bancorp, a New Jersey corporation and
registered bank holding company ("United"), and State Bank of South Orange, a
commercial bank organized under the laws of New Jersey ("SBSO").
BACKGROUND
1. United, United National Bank ("UNB"), and SBSO, as of the
date hereof, have executed a definitive agreement and plan of merger (the
"Merger Agreement") pursuant to which United will acquire SBSO through a merger
of SBSO with and into UNB (the "Merger").
2. During the negotiation of the Merger Agreement, United and
UNB advised SBSO that they would not execute the Merger Agreement unless SBSO
executed this Agreement.
3. As an inducement to United to enter into the Merger
Agreement and in consideration for such entry, SBSO has agreed to grant to
United an option to purchase authorized but unissued shares of common stock of
SBSO 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, United and SBSO,
intending to be legally bound hereby, agree:
1. Grant of Option. SBSO hereby grants to United the option to
purchase 127,275 shares of the common stock, $5.00 par value (the "Common
Stock"), of SBSO at a price of $31.25 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), United may exercise the Option, in whole or in part, at
any time or from time to time, subject to 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 United or an affiliate of United:
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;
b. enters into a letter of intent or an agreement, whether
oral or written, with SBSO pursuant to which such person or any affiliate of
such person would (i) merge or consolidate, or enter into any similar
transaction, with SBSO, (ii) acquire all or a significant portion of the assets
or liabilities of SBSO, 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;
c. makes a filing with any bank or thrift regulatory authority
or publicly announces a bona fide proposal (a "Proposal") for (i) any merger,
consolidation or acquisition of all or a significant portion of all the assets
or liabilities of SBSO or any other business combination involving SBSO, 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 stockholders of
SBSO called to vote on the Merger and SBSO' stockholders fail to approve the
Merger by the vote required by applicable law at the meeting of stockholders
called for such purpose; or
d. makes a bona fide Proposal and thereafter, but before such
Proposal has been Publicly Withdrawn, SBSO 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 United.
The term "Triggering Event" also means the taking of any
material direct or indirect action by SBSO or any of its directors, officers or
agents, with the formal or informal approval or acquiescence of the SBSO Board
of Directors, with the intention of 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 SBSO, or a sale of a significant number of shares of Common Stock or any
significant portion of its assets or liabilities.
The term "significant portion" means 25% of the assets or
liabilities of SBSO. The term "significant number" means 20% of the outstanding
shares of SBSO.
"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 SBSO or in soliciting or inducing
any other person (other than United or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised
at any time (i) in the absence of any required governmental or regulatory
approval or consent necessary for SBSO to issue the shares of Common Stock
covered by the Option (the "Option Shares") or United 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.
SBSO shall notify United promptly in writing of the occurrence
of any Triggering Event known to it, it being understood that the giving of such
notice by SBSO shall not be a condition to the right of United to exercise the
Option. SBSO will not take any action which would have the effect of preventing
or disabling SBSO from delivering the Option Shares to United upon exercise of
the Option or otherwise performing its obligations under this Agreement.
In the event United wishes to exercise the Option after a
Triggering Event has occurred and prior to the termination of this Agreement,
United shall send a written notice to SBSO (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 (not less than three days after such
notice is sent to SBSO) 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) United will make payment to SBSO of the aggregate price for the
Option Shares so purchased by wire transfer of immediately available funds to an
account designated by SBSO, (b) SBSO will deliver to United 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 SBSO, registered in the name of United or its
designee, in such denominations as were specified by United in its notice of
exercise and, if necessary, bearing a legend as set forth below and (c) United
shall pay any transfer or other taxes required by reason of the issuance of the
Option Shares so purchased.
If required under applicable federal securities laws, 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 State Bank of South Orange, 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 United, SBSO shall,
if necessary for the resale of the Option or the Option Shares by United,
prepare and file a registration statement with the Securities and Exchange
Commission, the Federal Deposit Insurance Corporation and any state securities
bureau, covering the Option and such number of Option Shares as United shall
specify in its request, and SBSO 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 United
shall in no event have the right to have more than one such registration
statement become effective.
In connection with such filing, SBSO shall use its best
efforts to cause to be delivered to United such certificates, opinions,
accountant's letters and other documents as United shall reasonably request and
as are customarily provided in connection with registrations of securities under
the Securities Act of 1933, as amended. All expenses incurred by SBSO 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 SBSO and blue sky fees and expenses shall be paid by SBSO.
Underwriting discounts and commissions to brokers and dealers relating to the
Option Shares, fees and disbursements of counsel to United and any other
expenses incurred by United in connection with such registration shall be borne
by United. In connection with such filing, SBSO shall indemnify and hold
harmless United against any losses, claims, damages or liabilities, joint or
several, to which United may become subject, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any preliminary or final registration statement or any amendment or
supplement thereto, or arise out of a material fact required to be stated
therein or necessary to make the statements therein not misleading; and SBSO
will reimburse United for any legal or other expense reasonably incurred by
United in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that SBSO 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 of 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 United specifically for use in
the preparation thereof. United will indemnify and hold harmless SBSO 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
United for use in the preparation of such preliminary or final registration
statement or such amendment or supplement thereto; and United will reimburse
SBSO for any legal or other expense reasonably incurred by SBSO in connection
with investigating or defending any such loss, claim, damage, liability or
action.
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 SBSO
with another entity, or in the event any sale of all or substantially all of the
assets of SBSO 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 United and SBSO will use its
best 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 United is the holder
hereof, approval of the Board of Governors of the Federal Reserve System and
SBSO 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 SBSO. SBSO hereby
represents and warrants to United as follows:
a. Due Authorization. SBSO has full corporate power
and authority to execute, deliver and perform this Agreement and all corporate
action necessary for the execution, delivery and performance of this Agreement
has been duly taken by SBSO.
b. Authorized Shares. SBSO 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 by-laws of SBSO or any agreement,
instrument, judgment, decree, statute, rule or order applicable to SBSO.
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, United shall have the right to seek money damages
against SBSO for a breach of this Agreement.
9. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof.
10. Assignment or Transfer. United 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 an affiliate of United, except
after the occurrence of a Triggering Event. United represents that it is
acquiring the Option for United's own account and not with a view to or for sale
in connection with any distribution of the Option or the Option Shares. United
shall have the right to assign this Agreement to any party it selects after the
occurrence of a Triggering Event.
11. Amendment of Agreement. By 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 United:
United National Bancorp
0000 Xxxxx 00 Xxxx, P.O. Box 6000
Bridgewater, New Jersey 08807-0010
Attn.: Xxxxxx X. Xxxxxx, Chairman,
President and Chief Executive Officer
With a copy to:
Pitney, Xxxxxx, Xxxx & Xxxxx
000 Xxxxxx Xxxxx
Xxxxxxx Xxxx, Xxx Xxxxxx 00000-0000
X.X. Xxx 0000
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attn.: Xxxxxx X. Xxxxx, Esq.
If to SBSO:
State Bank of South Orange
Valley and Third Streets, X.X. Xxx 000
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
Attn.: Xxxxx X. Xxxxx, President and
Chief Executive Officer
With a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn.: Xxxxx Xxxxxxxxx, 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 (i) compliance with any of the
covenants of the other party contained in this Agreement and/or (ii) 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, except as provided in Section 10 permitting United to assign its
rights and obligations hereunder.
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), 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 Agreement to be
executed by its duly authorized officer, all as of the day and year first above
written.
STATE BANK OF SOUTH ORANGE
XXXXX X. XXXXX
By:------------------------------------------
Xxxxx X. Xxxxx, President and CEO
UNITED NATIONAL BANCORP
XXXXXX X. XXXXXX
By:------------------------------------------
Xxxxxx X. Xxxxxx
Chairman, President and
Chief Executive Officer