EXHIBIT 2.2
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "AGREEMENT") is made as of March
18, 1999, by and between Old Kent Financial Corporation, a Michigan
corporation ("GRANTEE"), and Pinnacle Banc Group, Inc., an Illinois
corporation ("ISSUER").
As a condition to, and contemporaneous with, the execution of
this Agreement, the parties are entering into an Agreement and Plan of
Merger dated March 18, 1999 (the "PLAN OF MERGER"). In consideration
therefor, and as an inducement to Grantee to pursue the transactions
contemplated by the Plan of Merger, Issuer has agreed to grant Grantee the
Option (as defined below). The board of directors of Issuer has approved
the grant of the Option and the Plan of Merger. Capitalized terms used but
not defined in this Agreement shall have the meanings given to those terms
in the Plan of Merger.
In consideration of the foregoing, and the mutual covenants and
agreements set forth in this Agreement and in the Plan of Merger, the
parties agree:
1. GRANT OF OPTION.
(a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "OPTION") to purchase, subject to the terms of this
Agreement, up to 1,479,128 fully paid and nonassessable shares of Issuer
Common Stock, par value $3.12 ("COMMON STOCK"), at a price per share equal
to $27.1875; PROVIDED that in the event Issuer issues or agrees to issue
any shares of Common Stock at a price per share less than $27.1875 (as
adjusted pursuant to Section 5(b)) (other than as permitted under the Plan
of Merger), such price shall be equal to such lesser price (as adjusted, if
applicable, the "OPTION PRICE"); FURTHER PROVIDED, that in no event shall
the number of shares for which this Option is exercisable, together with
the number of shares owned by Grantee other than shares held by Grantee in
a fiduciary capacity for a customer as to which it has no beneficial
interest ("FIDUCIARY SHARES"), exceed 19.99% of the Issuer's issued and
outstanding shares of Common Stock.
(b) The number of shares of Common Stock subject to the Option
shall be increased or decreased, as appropriate, in the event that any
additional shares of Common Stock are issued or otherwise become
outstanding (other than pursuant to this Agreement or pursuant to an event
described in Section 5(a) of this Agreement) or existing shares are
redeemed, retired or otherwise become no longer outstanding after the date
of this Agreement so that, after any such issuance, redemption or
retirement, together with the number of shares previously issued pursuant
to this Agreement or otherwise owned by Grantee other than Fiduciary
Shares, the number of shares of Common Stock subject to the Option equals
19.99% of the number of shares of Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to the
Option. Nothing contained in this Section 1(b) or elsewhere in this
Agreement shall be considered to authorize Issuer to issue shares in breach
of any provision of the Plan of Merger.
2. EXERCISE OF OPTION.
(a) The holder or holders of the Option (the "HOLDER") may
exercise the Option, in whole or part, if and when at any time both an
Initial Triggering Event (as defined below) and a Subsequent Triggering
Event (as defined below) shall have occurred prior to the occurrence of an
Exercise Termination Event (as defined below), PROVIDED that the Holder
shall have sent notice of such exercise (as required by Section 2(f))
within six months following such Subsequent Triggering Event (or such later
date as provided in Section 10).
(b) Each of the following shall be an "EXERCISE TERMINATION
EVENT": (i) consummation of the Merger at the Effective Time of the Merger;
(ii) termination of the Plan of Merger in accordance with the provisions
thereof if such termination occurs before the occurrence of an Initial
Triggering Event; and (iii) the passage of 18 months (or such longer period
as provided in Section 10) after termination of the Plan of Merger if such
termination follows the occurrence of an Initial Triggering Event.
Notwithstanding anything to the contrary in this Agreement: (i) the Option
may not be exercised at any time when Grantee shall be in material breach
of any of its covenants or agreements contained in the Plan of Merger such
that Issuer shall be entitled to terminate the Plan of Merger as a result
of such material breach; and (ii) this Agreement shall automatically
terminate upon the proper termination of the Plan of Merger (x) by Issuer
as a result of the material breach by Grantee of its covenants or
agreements contained in the Plan of Merger, or (y) by Issuer or Grantee if
the approval by any federal or state governmental authority or regulatory
or administrative agency or commission (each a "GOVERNMENTAL ENTITY")
necessary to consummate the Merger and the other transactions contemplated
by the Plan of Merger shall have been denied by final nonappealable action
of such agency or authority.
(c) The term "INITIAL TRIGGERING EVENT" shall mean any of the
following events or transactions occurring on or after the date of this
Agreement:
(i) Issuer or any of its subsidiaries (an "ISSUER
SUBSIDIARY"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as defined below) with any person (for purposes of this
Agreement, the term "person" has the meaning given that term in
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Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), and the rules and regulations
thereunder) other than Grantee or any of its subsidiaries (a "GRANTEE
SUBSIDIARY");
(ii) the board of directors of Issuer shall have recommended
that the shareholders of Issuer approve or accept any Acquisition
Transaction other than the Merger;
(iii) any person other than Grantee or any Grantee
Subsidiary shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding shares
of Common Stock (for purposes of this Agreement, the term "beneficial
ownership" has the meaning given that term in Section 13(d) of the
Exchange Act and the rules and regulations thereunder);
(iv) the shareholders of Issuer shall have voted and failed
to approve the Plan of Merger and the Merger at a meeting that was
held for that purpose or any adjournment or postponement thereof, or
such meeting shall not have been held in violation of the Plan of
Merger or shall have been canceled prior to termination of the Plan of
Merger if, prior to such meeting (or if such meeting shall not have
been held or shall have been canceled, prior to such termination), it
shall have been publicly announced or the shareholders of Issuer shall
have been advised that any person (other than Grantee or any Grantee
Subsidiary) shall have made, or shall have an intention to make, a
proposal to engage in an Acquisition Transaction;
(v) the board of directors of Issuer shall not have
recommended, or shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse
in any respect to Grantee, its recommendation that the shareholders of
Issuer approve the transactions contemplated by the Plan of Merger at
any meeting that was held for that purpose, in anticipation of
engaging in an Acquisition Transaction (other than with Grantee or any
Grantee Subsidiary) or following a proposal to Issuer to engage in an
Acquisition Transaction, or Issuer or any Issuer Subsidiary shall have
authorized, recommended or proposed (or publicly announced or advised
its shareholders of its intention to authorize, recommend or propose)
an agreement to engage in an Acquisition Transaction with any person
other than Grantee or any Grantee Subsidiary;
(vi) any person other than Grantee or any Grantee Subsidiary
shall have filed with the Securities and Exchange Commission ("SEC") a
registration statement or tender offer materials with respect to a
potential exchange or tender offer that would constitute an
Acquisition Transaction (or filed a preliminary proxy statement with
the SEC with respect to a potential vote by its shareholders to
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approve the issuance of shares to be offered in such an exchange or
tender offer);
(vii) Issuer shall have willfully breached any covenant
or obligation contained in the Plan of Merger in anticipation of
engaging in an Acquisition Transaction (other than with Grantee or any
Grantee Subsidiary), and following such breach Grantee would be
entitled to terminate the Plan of Merger (whether immediately or after
the giving of notice or passage of time, or both);
(xiii) any person other than Grantee or any Grantee
Subsidiary shall have filed an application or notice with the
applicable Governmental Entity under the Bank Holding Company Act of
1956, the Federal Deposit Insurance Act, the Illinois Bank Holding
Company Act of 1957 or the Illinois Banking Act, which application or
notice has been accepted for processing, for approval to engage in an
Acquisition Transaction; or
(xiv) a Fiduciary Event shall have occurred under the
Plan of Merger.
For purposes of this Agreement, "ACQUISITION TRANSACTION" means: (a) a
merger or consolidation, or any similar transaction, involving Issuer or
any Issuer Subsidiary (other than mergers, consolidations or similar
transactions (i) involving solely Issuer and/or one or more wholly-owned
(except for directors' qualifying shares) Issuer Subsidiary, PROVIDED, any
such transaction is not entered into in violation of the terms of the Plan
of Merger or (ii) in which the shareholders of Issuer immediately prior to
the completion of such transaction own at least 50% of the Common Stock of
Issuer (or the resulting or surviving entity in such transaction)
immediately after completion of such transaction, PROVIDED, any such
transaction is not entered into in violation of the terms of the Plan of
Merger); (b) a purchase, lease or other acquisition of all or a substantial
part of the assets or deposits of Issuer or Issuer Subsidiary; (c) a
purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 10% or more of the
voting power of Issuer or any Issuer Subsidiary; or (d) any substantially
similar transaction. For purposes of this Agreement, "subsidiary" has the
meaning given that term in Rule 12b-2 under the Exchange Act. In this
Agreement, the phrase "in anticipation of engaging in an Acquisition
Transaction" shall include, without limitation, any action taken by
Issuer's officers or board of directors after any written or oral,
authorized or unauthorized, proposal or expression of interest has been
communicated to any member of Issuer's management or board of directors
concerning an Acquisition Transaction that in any way would involve Issuer
and such proposal or expression of interest has not been withdrawn at the
time of the action.
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(d) The term "SUBSEQUENT TRIGGERING EVENT" shall mean either of
the following events or transactions occurring after the date of this
Agreement:
(i) the acquisition by any person (other than Grantee or
any Grantee Subsidiary) of beneficial ownership of 25% or more of the
then outstanding Common Stock; or
(ii) occurrence of the Initial Triggering Event described in
clause (i) of Section 2(c), except that the percentage referred to for
purposes of defining "Acquisition Transaction" in clause (c) of that
definition shall be 25%.
(e) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(collectively, "TRIGGERING EVENTS"), it being understood that the giving of
such notice by Issuer shall not be a condition to the right of Holder to
exercise the Option.
(f) If Holder is entitled and wishes to exercise the Option (or
any portion thereof), it shall send to Issuer a written notice (the date of
such notice is 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 60
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
Governmental Entity is required in connection with such purchase, Holder
shall promptly file the required notice or application for approval, shall
notify Issuer of such filing, 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 periods have
expired or been terminated or such approvals have been obtained and any
requisite waiting period or periods shall have passed. Any exercise of the
Option shall be considered to occur on the Notice Date relating thereto.
(g) At the closing referred to in Section 2(f), Holder shall (i)
pay to Issuer the aggregate purchase price for the shares of Common Stock
purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices; PROVIDED, that failure or refusal of Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude
Holder from exercising the Option.
(h) At the closing, simultaneously with the delivery of
immediately available funds as provided in Section 2(g), Issuer shall
deliver to Holder a certificate or certificates representing the number of
shares of Common Stock purchased by Holder and, if the Option should be
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exercised in part only, a new Option evidencing the rights of Holder to
purchase the balance of the shares subject to this Option.
(i) Certificates for Common Stock delivered at a closing under
this Agreement may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement, dated as of March
18, 1999, between the registered holder hereof and Issuer and to
resale restrictions arising under the Securities Act of 1933, as
amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if Holder shall have delivered to
Issuer a copy of a letter from the staff of the SEC, or an opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the
effect that such legend is not required for purposes of the Securities Act;
(ii) the reference to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in compliance with
the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the opinion of counsel to
Holder; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required
by law.
(j) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under Section 2(f) and the tender of
the applicable purchase price in immediately available funds, Holder shall
be considered, subject to the receipt of any necessary regulatory
approvals, to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books
of Issuer shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to Holder.
Issuer shall pay all expenses, and any and all federal, state and local
taxes and other charges that may be payable in connection with the
preparation, issuance and delivery of stock certificates under this Section
2 in the name of Holder or its assignee, transferee or designee.
3. COVENANTS OF ISSUER. Issuer agrees: (i) that it shall at all
times maintain, free from preemptive rights, sufficient authorized but
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unissued or treasury shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock after giving
effect to all other options, warrants, convertible securities and other
rights to purchase Common Stock; (ii) that it will not, by charter
amendment or through reorganization, consolidation, merger, dissolution or
sale of assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or
conditions to be observed or performed under this Agreement by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification,
reporting and waiting period requirements and (y) if, under the applicable
federal or state regulatory requirements or any state or federal banking
law, prior approval of or notice to any Governmental Entity is necessary
before the Option may be exercised, cooperating fully with Holder in
preparing such applications or notices and providing such information to
each such Governmental Entity as they may require to permit Holder to
exercise the Option and Issuer duly and effectively to issue shares of
Common Stock pursuant to this Agreement; and (iv) promptly to take all
action provided in this Agreement to protect the rights of Holder against
dilution.
4. EXCHANGE OF OPTION. This Agreement (and the Option granted by
this Agreement) are exchangeable, without expense, at the option of Holder,
upon presentation and surrender of this Agreement at the principal office
of Issuer, for other Agreements providing for Options of different
denominations entitling Holder to purchase, on the same terms and subject
to the same conditions as are set forth in this Agreement, in the aggregate
the same number of shares of Common Stock subject to this Option. The terms
"Agreement" and "Option" as used in this Agreement include any stock option
agreements and related options for which this Agreement (and the Option
granted by this Agreement) may be exchanged. Upon receipt by Issuer of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable by anyone.
5. ADJUSTMENTS. In addition to the adjustment in the number of
shares of Common Stock that are subject to the Option pursuant to Section 1
of this Agreement, the number of shares of Common Stock subject to the
Option and the Option Price shall be subject to adjustment from time to
time as provided in this Section 5.
(a) In the event of any change in, or distributions in respect
of, Common Stock by reason of stock dividends, stock splits, mergers,
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recapitalizations, combinations, subdivisions, conversions, exchanges of
shares or the like, the type and number of shares of Common Stock subject
to the Option shall be appropriately adjusted and proper provision shall be
made so that, if any additional shares of Common Stock are to be issued or
otherwise become outstanding as a result of any such change (other than
pursuant to an exercise of the Option), the number of shares of Common
Stock that remain subject to the Option shall be increased so that, after
such issuance and together with shares of Common Stock previously issued
pursuant to the exercise of the Option (as adjusted on account of any of
the foregoing changes in the Common Stock), such number equals 19.99% of
the number of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock subject to the
Option is adjusted as provided in this Section 5, the Option Price shall be
adjusted by multiplying the Option Price by a fraction, the numerator of
which shall be equal to the number of shares of Common Stock subject to the
Option prior to the adjustment and the denominator of which shall be equal
to the number of shares of Common Stock subject to the Option after the
adjustment.
6. REGISTRATION RIGHTS. Upon the occurrence of a Subsequent
Triggering Event that occurs prior to an Exercise Termination Event, Issuer
shall, at the request of Grantee delivered within 12 months (or such later
period as provided in Section 10) of such Subsequent Triggering Event
(whether on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or owner of any of the shares of Common Stock
issued pursuant hereto), promptly prepare, file and keep current a shelf
registration statement under the Securities Act covering any shares issued
and/or issuable pursuant to this Option and shall use its best efforts to
cause such registration statement to become effective and remain current to
permit the sale or other disposition of any shares of Common Stock issued
upon total or partial exercise of this Option ("OPTION SHARES") in
accordance with any plan of disposition requested by Grantee. Issuer will
use its best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess
of 180 days from the day such registration statement first becomes
effective or such shorter time as may be reasonably necessary to effect
such sales or other dispositions. Grantee shall have the right to demand
two such registrations. Issuer shall bear the costs of both of such
registrations (including, without limitation, Issuer's attorneys' fees,
printing costs and filing fees, except for underwriting discounts or
commissions, brokers' fees and the fees and disbursements of Grantee's
counsel related thereto). Notwithstanding the above, if, at the time of
any request by Grantee for registration of Option Shares as provided above,
Issuer is in the process of registration with respect to an underwritten
public offering by Issuer of shares of Common Stock, and if in the good
faith judgment of the managing underwriter or managing underwriters (or, if
none, the sole underwriter or underwriters) of such offering the offer and
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sale of the Option Shares would interfere with the successful marketing of
the shares of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated by this
Section 6 may be reduced; PROVIDED, that, after any such required
reduction, the number of Option Shares included in such offering for the
account of Holder shall constitute at least 25% of the total number of
shares to be sold by Holder and Issuer in the aggregate; PROVIDED FURTHER,
that if such reduction occurs, then Issuer shall file a registration
statement for the balance of the Option Shares subject to the registration
demand as promptly as practical as to which no reduction pursuant to this
Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the 12 month period referred to
in the first sentence of this Section shall be increased to 24 months.
Each such Holder shall provide all information reasonably requested by
Issuer for inclusion in any registration statement to be filed to register
Option Shares. If requested by any such Holder in connection with such
registration, Issuer shall 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 Issuer.
Upon receiving any request under this Section 6 from any Holder, Issuer
agrees to send a copy thereof to any other person known to Issuer to be
entitled to registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything to the
contrary in this Agreement, in no event shall the number of registrations
that Issuer is obligated to effect be increased by reason of the fact that
there shall be more than one Holder as a result of any assignment or
division of this Agreement.
7. REPURCHASE OF OPTION.
(a) At any time after the occurrence of a Repurchase Event
(defined below): (i) at the request of Holder, delivered prior to an
Exercise Termination Event (or such later period as provided in Section
10), Issuer (or any successor to Issuer) shall repurchase the Option from
Holder at a price (the "OPTION REPURCHASE PRICE") equal to the amount by
which (x) the market/offer price (as defined below) exceeds (y) the Option
Price, multiplied by the number of shares for which this Option may then be
exercised; and (ii) at the request of the owner of Option Shares from time
to time (the "OWNER"), delivered prior to an Exercise Termination Event (or
such later period as provided in Section 10), Issuer (or any successor to
Issuer) shall repurchase such number of the Option Shares from Owner as
Owner shall designate at a price (the "OPTION SHARE REPURCHASE PRICE")
equal to the market/offer price multiplied by the number of Option Shares
so designated. The term "MARKET/OFFER PRICE" shall mean the highest of:
(i) the price per share of Common Stock at which a tender or exchange offer
therefor has been made; (ii) the price per share of Common Stock to be paid
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by any third party pursuant to an agreement with Issuer; (iii) the highest
sale price for shares of Common Stock within the six-month period
immediately preceding the date Holder gives notice of the required
repurchase of this Option or Owner gives notice of the required repurchase
of Option Shares, as the case may be; or (iv) in the event of a sale of all
or any substantial part of Issuer's assets or deposits, the sum of the net
price paid in such sale for such assets or deposits and the current market
value of the remaining assets of Issuer as determined by a nationally
recognized investment banking firm selected by Holder or Owner, as the case
may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than
cash shall be determined by a nationally recognized investment banking firm
selected by Holder or Owner, as the case may be, and reasonably acceptable
to Issuer.
(b) Holder or Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or notices stating
that Holder or Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. As promptly as practicable, and in any event
within five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto, Issuer shall deliver or cause to be delivered to
Holder the Option Repurchase Price and/or to Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify Holder and/or Owner and thereafter deliver or cause
to be delivered, from time to time, to Holder and/or Owner, as appropriate,
the portion of the Option Repurchase Price and the Option Share Repurchase
Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; PROVIDED, that if Issuer at any time after delivery of a notice
of repurchase pursuant to Section 7(b) is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from
delivering to Holder and/or Owner, as appropriate, the Option Repurchase
Price and the Option Share Repurchase Price, respectively, in full (and
Issuer hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly
as practicable in order to accomplish such repurchase), Holder or Owner may
revoke its notice of repurchase of the Option or the Option Shares either
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in whole or to the extent of the prohibition, whereupon, in the latter
case, Issuer shall promptly: (i) deliver to Holder and/or Owner, as
appropriate, that portion of the Option Repurchase Price or the Option
Share Repurchase Price that Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to Holder, a new Agreement
evidencing the right of Holder to purchase that number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Agreement was exercisable at the time of delivery of
the notice of repurchase by a fraction, the numerator of which is the
Option Repurchase Price less the portion of the Option Repurchase Price
previously delivered to Holder and the denominator of which is the Option
Repurchase Price, and/or (B) to Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination
Event shall have occurred prior to the date of the notice by Issuer
described in the first sentence of this Section 7(c), or shall be scheduled
to occur at any time before the expiration of a period ending on the
thirtieth day after such date, Holder shall nonetheless have the right to
exercise the Option until the expiration of such 30-day period.
(d) For purposes of this Section 7, a "REPURCHASE EVENT" shall
be considered to have occurred upon the occurrence of any of the following
events or transactions after the date of this Agreement:
(i) the acquisition by any person (other than Grantee or
any Grantee Subsidiary) of beneficial ownership of 50% or more of the
then outstanding Common Stock; or
(ii) the consummation of any Acquisition Transaction
described in Section 2(c)(i), except that the percentage referred to
for purposes of defining "Acquisition Transaction" in clause (c) shall
be 50%.
8. SUBSTITUTE OPTION.
(a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement to (i) consolidate with or merge into
any person, other than Grantee or any Grantee Subsidiary, or engage in a
plan of exchange with any person, other than Grantee or any Grantee
Subsidiary and Issuer shall not be the continuing or surviving corporation
of such consolidation or merger or the acquiror in such plan of exchange,
(ii) permit any person, other than Grantee or any Grantee Subsidiary, to
merge into Issuer or be acquired by Issuer in a plan of exchange and Issuer
shall be the continuing or surviving corporation, but, in connection with
such merger or plan of exchange, the then outstanding shares of Common
Stock shall be changed into or exchanged for stock or other securities of
any other person or cash or any other property or the then outstanding
shares of Common Stock shall after such merger or plan of exchange
represent less than 50% of the outstanding shares and share equivalents of
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the merged or acquiring company, or (iii) sell or otherwise transfer all or
a substantial part of its or any Issuer Subsidiary's assets or deposits to
any person, other than Grantee or any Grantee Subsidiary, then, and in each
such case, the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth in this Agreement,
be converted into, or exchanged for, an option (the "SUBSTITUTE OPTION"),
at the election of Holder, to acquire capital stock of either (x) the
Acquiring Corporation (as defined below) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the following meanings:
(i) "ACQUIRING CORPORATION" means: (i) the continuing
or surviving person of a consolidation or merger with Issuer
(if other than Issuer); (ii) the acquiring person in a plan
of exchange in which Issuer is acquired; (iii) Issuer in a
merger or plan of exchange in which Issuer is the continuing
or surviving or acquiring person; and (iv) the transferee of
all or a substantial part of Issuer's assets or deposits (or
the assets or deposits of any Issuer Subsidiary).
(ii) "SUBSTITUTE COMMON STOCK" means the voting common
stock to be issued by the issuer of the Substitute Option
upon exercise of the Substitute Option.
(iii) "ASSIGNED VALUE" means the market/offer
price, as defined in Section 7.
(iv) "AVERAGE PRICE" means the average closing price of
a share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in
question, but in no event higher than the closing price of
the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; PROVIDED, that if Issuer
is the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock
issued by the person merging into Issuer or by any company
which controls or is controlled by such person, as Holder
may elect.
(c) The Substitute Option shall have the same terms as the
Option; PROVIDED, that if the terms of the Substitute Option cannot, for
legal reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Holder. The issuer of the
Substitute Option shall also enter into an agreement with the then Holder
or Holders of the Substitute Option in substantially the same form as this
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Agreement (after giving effect for such purpose to the provisions of
Section 9), which agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence
of Section 8(a), divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal
to the Option Price multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence
of Section 8(a) and the denominator of which shall be the number of shares
of Substitute Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the subsections above, shall
the Substitute Option be exercisable for a number of shares that, together
with the number of shares owned by Grantee other than Fiduciary Shares, is
more than 19.99% of the shares of Substitute Common Stock outstanding prior
to exercise of the Substitute Option. In the event that the Substitute
Option would be exercisable for more than 19.99% of the shares of
Substitute Common Stock outstanding prior to exercise but for this Section
8(e), the issuer of the Substitute Option (the "SUBSTITUTE OPTION ISSUER")
shall make a cash payment to Holder equal to the excess of (i) the value of
the Substitute Option without giving effect to the limitation in this
Section 8(e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this Section 8(e). This difference in value
shall be determined by a nationally recognized investment banking firm
selected by Holder and reasonably acceptable to Substitute Option Issuer.
(f) Issuer shall not enter into any transaction described in
Section 8(a) unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
under this Agreement.
9. REPURCHASE OF SUBSTITUTE OPTION.
(a) At the request of a holder of the Substitute Option (a
"SUBSTITUTE OPTION HOLDER"), the Substitute Option Issuer shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"SUBSTITUTE OPTION REPURCHASE PRICE") equal to the amount by which (i) the
Highest Closing Price (as defined below) exceeds (ii) the exercise price of
the Substitute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exercised. In
addition, at the request of the owner (the "SUBSTITUTE SHARE OWNER") of
shares of Substitute Common Stock, the Substitute Option Issuer shall
repurchase the Substitute Common Stock at a price (the "SUBSTITUTE SHARE
REPURCHASE PRICE") equal to the Highest Closing Price multiplied by the
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number of Substitute Shares so designated. The term "HIGHEST CLOSING PRICE"
shall mean the highest closing price for shares of Substitute Common Stock
within the six-month period immediately preceding the date the Substitute
Option Holder gives notice of the required repurchase of the Substitute
Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Common Stock, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner,
as the case may be, may exercise their respective rights to require the
Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Common Stock pursuant to this Section 9 by surrendering for such
purpose to the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such an
agreement, a copy of this Agreement) and certificates for Substitute Common
Stock accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Common Stock in accordance with the provisions
of this Section 9. As promptly as practicable, and in any event within five
business days after the surrender of the Substitute Option and/or
certificates representing Substitute Common Stock and the receipt of such
notice or notices relating thereto, the Substitute Option Issuer shall
deliver or cause to be delivered to the Substitute Option Holder the
Substitute Option Repurchase Price and/or to the Substitute Share Owner the
Substitute Share Repurchase Price therefor or the portion thereof that the
Substitute Option Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Substitute Option and/or the
Substitute Common Stock in part or in full, the Substitute Option Issuer
shall immediately so notify the Substitute Option Holder and/or the
Substitute Share Owner and thereafter deliver or cause to be delivered,
from time to time, to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five business days
after the date on which the Substitute Option Issuer is no longer so
prohibited; PROVIDED, that if the Substitute Option Issuer is at any time
after delivery of a notice of repurchase pursuant to Section 9(b)
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively,
in full (and the Substitute Option Issuer shall use its best efforts to
obtain all required regulatory and legal approvals as promptly as
practicable to accomplish such repurchase), the Substitute Option Holder or
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Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Common Stock either in whole or to the
extent of the prohibition, whereupon, in the latter case, the Substitute
Option Issuer shall promptly: (i) deliver to the Substitute Option Holder
or Substitute Share Owner, as appropriate, that portion of the Substitute
Option Repurchase Price or the Substitute Share Repurchase Price that the
Substitute Option Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (x) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of Substitute Common Stock obtained by
multiplying the number of shares of Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of
the notice of repurchase by a fraction, the numerator of which is the
Substitute Option Repurchase Price less the portion of the Substitute
Option Repurchase Price previously delivered to the Substitute Option
Holder and the denominator of which is the Substitute Option Repurchase
Price, and/or (y) to the Substitute Share Owner, a certificate for the
Substitute Common Stock it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the
notice by the Substitute Option Issuer described in the first sentence of
Section 9(c), or shall be scheduled to occur at any time before the
expiration of a period ending on the thirtieth day after such date, the
Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day period
10. EXTENSION OF EXERCISE PROVISIONS. The 30-day, six-month, 12-
month, 18-month or 24-month time periods for the exercise of certain rights
under Sections 2, 6, 7, 9, 12 and 14 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such
rights (for so long as the Holder, Owner, Substitute Option Holder or
Substitute Common Stock Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the
expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the Exchange Act by
reason of such exercise.
11. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been
duly and validly authorized by the board of directors of Issuer prior to
the date of this Agreement and no other corporate proceedings on the part
of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly
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executed and delivered by Issuer. This Agreement is the valid and legally
binding obligation of Issuer.
(b) Issuer has taken all necessary corporate action to
authorize, reserve and permit it to issue, and at all times from the date
of this Agreement through the termination of this Agreement in accordance
with its terms will have reserved for issuance upon the exercise of the
Option, that number of shares of Common Stock equal to the maximum number
of shares of Common Stock at any time and from time to time issuable under
this Agreement, and all such shares, upon issuance pursuant to this
Agreement, will be duly authorized, validly issued, fully paid,
nonassessable and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive
rights.
12. ASSIGNMENT. Neither party to this Agreement may assign any of
its rights or obligations under this Agreement or the Option created under
this Agreement to any other person without the express written consent of
the other party, except that if a Subsequent Triggering Event shall have
occurred prior to an Exercise Termination Event, Grantee, subject to the
express provisions of this Agreement, may assign in whole or in part its
rights and obligations under this Agreement; PROVIDED, that until the date
15 days following the date on which the last of all applicable Governmental
Entities has approved an application by Grantee to acquire the shares of
Common Stock subject to the Option, Grantee may not assign its rights under
the Option except in: (i) a widely dispersed public distribution; (ii) a
private placement in which no one party acquires the right to purchase in
excess of 2% of the voting shares of Issuer; (iii) an assignment to a
single party (such as a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Grantee's behalf; or
(iv) any other manner approved by all applicable Governmental Entities.
13. COOPERATION. Grantee and Issuer each will use its best efforts
to make all filings with, and to obtain consents of, all third parties and
Governmental Entities necessary to the consummation of the transactions
contemplated by this Agreement, but Grantee shall not be obligated to apply
to state banking authorities for approval to acquire the shares of Common
Stock issuable under this Agreement until such time, if ever, as it
considers appropriate to do so.
14. MINIMUM REPURCHASE PROCEEDS.
(a) Grantee may, at any time following a Repurchase Event which
occurs prior to the occurrence of an Exercise Termination Event (or such
later period as provided in Section 10), relinquish the Option (together
with any Option Shares issued to and then owned by Grantee) to Issuer in
exchange for a cash fee equal to the Surrender Price; PROVIDED, that
Grantee may not exercise its rights pursuant to this Section 14 if Issuer
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has repurchased the Option (or any portion thereof) or any Option Shares
pursuant to Section 7. The "SURRENDER PRICE" shall be equal to $7,517,668
(i) plus, if applicable, Grantee's purchase price with respect to any
Option Shares and (ii) minus, if applicable, the excess of (A) the net cash
amounts, if any, received by Grantee pursuant to the arms' length sale of
Option Shares (or any other securities into which such Option Shares were
converted or exchanged) to any unaffiliated party, over (B) the Option
Price.
(b) Grantee may exercise its right to relinquish the Option and
any Option Shares pursuant to this Section 14 by surrendering to Issuer, at
its principal office, a copy of this Agreement together with certificates
for Option Shares, if any, accompanied by a written notice stating (i) that
Grantee elects to relinquish the Option and Option Shares, if any, in
accordance with the provisions of this Section 14 and (ii) the Surrender
Price. The Surrender Price shall be payable in immediately available
funds on or before the second business day following receipt of such notice
by Issuer.
(c) To the extent that Issuer is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from paying
the Surrender Price to Grantee in full, Issuer shall immediately so notify
Grantee and thereafter deliver or cause to be delivered, from time to time,
to Grantee, the portion of the Surrender Price that it is no longer
prohibited from paying, within five business days after the date on which
Issuer is no longer so prohibited; PROVIDED, that if Issuer at any time
after delivery of a notice of surrender pursuant to Section 14(b) is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from paying to Grantee the Surrender Price in full:
(i) Issuer shall (A) use its best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as
practicable in order to make such payments, (B) within five days of the
submission or receipt of any documents relating to any such regulatory and
legal approvals, provide Grantee with copies of the same, and (c) keep
Grantee advised of both the status of any such request for regulatory and
legal approvals, as well as any discussions with any relevant regulatory or
other third party reasonably related to the same; and (ii) Grantee may
revoke such notice of surrender by delivery of a notice of revocation to
Issuer and, upon delivery of such notice of revocation, the date of the
Exercise Termination Event shall be extended to a date six months from the
date on which the Exercise Termination Event would have occurred if not for
the provisions of this Section 14(c) (during which period Grantee may
exercise any of its rights under this Agreement, including any and all
rights pursuant to this Section 14).
15. REMEDIES. The parties acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party and that
the obligations of the parties shall be enforceable by either party through
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injunctive or other equitable relief. In connection therewith, the parties
waive the posting of any bond or similar requirement.
16. SEVERABILITY. If any term, provision, covenant or restriction
contained in this 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, covenants and
restrictions contained in this 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 Holder is not
permitted to acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in Section
1(a) (as adjusted pursuant to Sections 1(b) or 5), it is the express
intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification of this Agreement.
17. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be
considered to have been duly given if delivered or sent and received by a
fax transmission (if receipt by the intended recipient is confirmed by
telephone and if hard copy is delivered by overnight delivery service the
next day), by hand delivery, or by a nationwide overnight delivery service
(all fees prepaid) to the respective addresses of the parties set forth in
the Plan of Merger.
18. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan, regardless of the
laws that might otherwise govern under applicable principles of conflicts
of laws.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be considered to be an original, but all
of which shall constitute one and the same agreement.
20. FEES AND EXPENSES. Except as otherwise expressly provided in
this Agreement, each party shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions
contemplated under this Agreement, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
21. ENTIRE AGREEMENT. Except as otherwise expressly provided in this
Agreement or in the Plan of Merger, this Agreement contains the entire
agreement between the parties with respect to the transactions contemplated
under this Agreement and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms and
conditions of this Agreement shall inure to the benefit of and be binding
upon the parties to this Agreement and their respective successors and
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permitted assigns. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties to this
Agreement, and their respective successors and permitted assignees, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
[BALANCE OF THIS PAGE INTENTIONALLY BLANK]
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In Witness Whereof, the parties have caused this Stock Option
Agreement to be executed by their officers, thereunto duly authorized, as
of the date first written above.
Old Kent Financial Corporation
By: /S/ XXXX X. XXXXXXX
Xxxx X. Xxxxxxx
Executive Vice President
Pinnacle Banc Group, Inc.
By: /S/ XXXX X. XXXXXXX, XX.
Xxxx X. Xxxxxxx, Xx.
Vice Chairman and Chief
Executive Officer
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