EXHIBIT 2(c)
Execution Copy
STOCK OPTION AGREEMENT
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THIS STOCK OPTION AGREEMENT ("Option Agreement"), dated as of January 5,
1996, is by and between The Safety Fund Corporation ("Safety Fund"), a
Massachusetts corporation registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended ("BHC Act"), and CFX Corporation
("CFX"), a New Hampshire corporation registered as a bank holding company under
the BHC Act.
WITNESSETH
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WHEREAS, the Boards of Directors of Safety Fund and CFX have approved an
Agreement and Plan of Merger ("Merger Agreement"), providing for certain
transactions pursuant to which Safety Fund would be merged with and into CFX;
WHEREAS, as a condition to CFX's entry into the Merger Agreement and to
induce such entry, Safety Fund has agreed to grant to CFX the option set forth
herein to purchase authorized but unissued shares of Safety Fund 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
used herein shall have the same meanings as in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Safety Fund hereby grants to CFX an option ("Option") to purchase up to 332,000
shares of Safety Fund Common Stock, at a price of $20.00 per share payable in
cash as provided in Section 4 hereof; provided, however, that in the event
Safety Fund issues or agrees to issue any shares of Safety Fund Common Stock in
breach of its obligations under the Merger Agreement at a price less than $20.00
per share (as adjusted pursuant to Section 6 hereof), the exercise price shall
be equal to such lesser price. Notwithstanding anything else in this Agreement
to the contrary, the number of shares of Safety Fund Common Stock subject to the
Option shall be reduced to such lesser number, if any, as may from time to time
be necessary, but only for so long as may be necessary, to cause CFX not to
become an "interested stockholder" for purposes of Chapter 11OF of the General
Laws of the Commonwealth of Massachusetts.
3. EXERCISE OF OPTION.
(a) 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 Time of the Merger or (ii) termination
(other than a termination resulting from a willful breach by Safety Fund of any
covenant contained therein) of the Merger Agreement in accordance with the
provisions thereof prior to the
occurrence of a Subsequent Purchase Event (as defined below) or (iii) six months
after termination of the Merger Agreement if such termination follows the
occurrence of a Subsequent Purchase Event or is due to a willful breach by
Safety Fund of any covenant contained therein; and provided further that any
such exercise shall be subject to compliance with applicable provisions of law.
As used herein "Subsequent Purchase Event" shall mean a Purchase Event that
occurs after the date hereof.
(b) As used herein, a "Purchase Event" shall mean any of the
following events or transactions:
(1) any person (other than Safety Fund, any Safety Fund
subsidiary, CFX, or any CFX affiliate) shall have commenced a bona fide tender
or exchange offer to purchase shares of Safety Fund Common Stock such that upon
consummation of such offer such person would own or control 10% or more of the
outstanding shares of Safety Fund Common Stock;
(2) any person (other than Safety Fund or any Safety Fund
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 Safety Fund or any
Safety Fund subsidiary, (ii) purchase, lease or otherwise acquire all or
substantially all the assets of Safety Fund or any Safety Fund subsidiary, or
(iii) purchase or otherwise acquire (including by way of merger, consolidation,
share exchange or any similar transaction) securities representing 10% or more
of the voting power of Safety Fund or any Safety Fund subsidiary;
(3) any person (other than Safety Fund, any Safety Fund
subsidiary, subsidiaries of Safety Fund 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% or more
of the outstanding shares of Safety Fund 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 Safety Fund or any Safety Fund
subsidiary) shall have made a bona fide proposal to Safety Fund by public
announcement or written communication that is or becomes the subject of public
disclosure to (i) acquire Safety Fund or any Safety Fund 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 (i) above; or
(5) Safety Fund shall have willfully breached any covenant
contained in the Merger Agreement, which breach would entitle CFX to terminate
the Merger 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 Safety Fund, any Safety Fund subsidiary, CFX, or any CFX
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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 Safety Fund (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
Safety Fund 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 60 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.
(a) At the closing referred to in Section 3 hereof, CFX shall pay to
Safety Fund the aggregate purchase price for the shares of Safety Fund Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by a wire transfer to a bank account designated by Safety Fund.
(b) At such closing, simultaneously with the delivery of cash as
provided in subsection (a), Safety Fund shall deliver to CFX a certificate or
certificates representing the number of shares of Safety Fund Common Stock
purchased by CFX, and CFX shall deliver to Safety Fund a letter agreeing that
CFX will not offer to sell or otherwise dispose of such shares in violation of
applicable law or the provisions of this Option Agreement.
(c) Certificates for Safety Fund 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
The Safety Fund Corporation 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 The Safety Fund Corporation. A copy of such
agreement will be provided to the holder hereof without charge upon receipt
by The Safety Fund Corporation 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
Safety Fund a copy of a letter from the staff of the Commission, or an opinion
of counsel, in form and substance satisfactory to Safety Fund, to the effect
that such legend is not required for purposes of the Securities Act.
5. REPRESENTATIONS. Safety Fund hereby represents, warrants and covenants
to CFX as follows:
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(a) Safety Fund shall at all times maintain sufficient authorized but
unissued shares of Safety Fund Common Stock so that the option may be exercised
without authorization of additional shares of Safety Fund 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 Safety Fund 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 Safety Fund 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 Safety Fund Common Stock subject to the
Option shall be adjusted so that, after such issuance, it equals 19.99%. of the
number of shares of Safety Fund 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 Safety Fund to breach
any provision of the Merger Agreement.
7. REGISTRATION RIGHTS. Safety Fund shall, if requested by CFX, as
expeditiously as possible following the occurrence of a Purchase Event and prior
to the second anniversary thereof, file a registration statement on a form of
general use under the Securities Act if necessary in order to permit the sale or
other disposition of the shares of Safety Fund 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 Safety Fund for inclusion in any registration statement
to be filed hereunder. Safety Fund 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 Safety Fund 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 Safety Fund 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
Safety Fund. The first registration effected under this Section 7 shall be at
Safety Fund's expense except for underwriting commissions and the fees and
disbursements of CFX's counsel attributable to the registration of such Safety
Fund Common Stock. A second registration may be requested hereunder at CFX's
expense. In no event shall Safety Fund 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 Safety Fund of Safety Fund Common Stock. If
requested by CFX, in connection with any such registration, Safety Fund 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. Upon receiving any request from CFX
or assignee thereof under this Section 7, Safety Fund agrees to send a copy
thereof to CFX and to any assignee thereof known to Safety Fund, in each case by
promptly mailing the same, postage prepaid, to the address of record of
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the persons entitled to receive such copies.
8. REPURCHASE.
(a) 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"), Safety Fund shall repurchase the Option
(whether or not previously terminated) from CFX together with any shares of
Safety Fund Common Stock purchased by CFX pursuant thereto, at a price equal to
the sum of:
(1) the exercise price paid by CFX for any shares of Safety Fund
Common Stock acquired pursuant to the Option;
(2) the difference between the "market/tender offer" price for
shares of Safety Fund Common Stock (defined as the higher of the highest price
per share at which a tender or exchange offer has been made or the highest
reported sale price for shares of Safety Fund Common Stock within that portion
of the Repurchase Period preceding the date CFX gives notice of the required
repurchase under this Section 8) and the exercise price as determined pursuant
to Section 2 hereof multiplied by the number of shares of Safety Fund 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(b) hereof) and the exercise price paid by CFX for any
shares of Safety Fund 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 reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated by the Merger Agreement,
including, without limitation, legal, accounting and investment banking fees.
(b) In the event CFX exercises its rights under this Section 8,
Safety Fund shall, within three business days thereafter, pay the required
amount to CFX in immediately available funds and CFX shall surrender to Safety
Fund the Option and the certificates evidencing the shares of Safety Fund 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 and encumbrances; provided
that, if prior notification to the Federal Reserve Board is required in
connection with such purchase, Safety Fund 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 Safety Fund, any Safety Fund
subsidiary, CFX, or any CFX affiliate) shall have acquired beneficial ownership
of 51% or more of the outstanding shares of Safety Fund Common Stock; or
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(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 Safety Fund or any Safety Fund subsidiary to (i) merge or
consolidate, or enter into any similar transaction, with Safety Fund or any
Safety Fund subsidiary, (ii) purchase, lease or otherwise acquire all or
substantially all the assets of Safety Fund or any Safety Fund subsidiary, or
(iii) purchase or otherwise acquire (including by way of merger, consolidation,
share exchange or any similar transaction) securities representing 51% or more
of the voting power of Safety Fund or any Safety Fund subsidiary.
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 Safety Fund to repurchase the full number of
shares of Safety Fund Common Stock provided in Section 2 hereof (as adjusted
pursuant to Section 6 hereof), it is the express intention of Safety Fund to
allow the holder to acquire or to require Safety Fund to repurchase such lesser
number of shares as may be permissible, without any amendment or modification
hereof.
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 contains 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 or the
Merger 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 Safety Fund 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. 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, except that in the event a Purchase Event shall have occurred and be
continuing CFX may assign in whole or in part its rights and obligations
hereunder; provided, however, that until the date 30 days following the date on
which the Federal Reserve Board approves an application by CFX under the BHC Act
to acquire the shares of Safety Fund Common Stock subject to the Option, CFX may
not assign its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which
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no one party acquires the right to purchase in excess of 2% of the voting shares
of Safety Fund, (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely dispersed public
distribution on CFX's behalf, or (iv) any other manner approved by the Federal
Reserve Board. If at any time prior to the expiration of the Option, CFX shall
desire to assign all or any part of the Option, other than in a manner described
in clause (i), (ii), or (iii) above, it shall give Safety Fund written notice of
the proposed transaction ("Offeror's Notice"), identifying the proposed
transferee and setting forth the terms of the proposed transaction. An
Offeror's Notice shall be deemed an offer by CFX to Safety Fund, which may be
accepted within two 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 portion thereof to a third party. Settlement shall be
within five business days of the date of the acceptance of the offer and the
purchase price shall be paid in immediately available funds. In the event of
the failure or refusal of Safety Fund to purchase all of the portion of the
Option covered by the Offeror's Notice, CFX may, within 60 days from the date of
the Offeror's Notice, sell all, but not less than all, of such portion of the
Option to such third party at no less than the price specified and on terms no
more favorable than those set forth in the Offeror's Notice.
(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 Merger 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.
(g) GOVERNING LAW. This option Agreement shall be governed by and
construed in accordance with the laws of Massachusetts 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
[SEAL) By:/s/ Peter J. Baxter
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Peter J. Baxter,
President and CEO
THE SAFETY FUND CORPORATION
[SEAL] By:/s/ Christopher W. Bramley
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Christopher W. Bramley,
President and CEO
[SEAL] By:/s/ Martin F. Connors, Jr.
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Martin F. Connors, Jr.,
Treasurer
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