EXHIBIT 4.1
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND MAY BE SUBJECT TO TRANSFER
RESTRICTIONS UNDER
FEDERAL AND STATE LAW
STOCK OPTION AGREEMENT
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STOCK OPTION AGREEMENT, dated as of July 18, 1998 (the "Agreement"), by and
between Dime Community Bancshares, Inc., a Delaware corporation ("DCB"), and
Financial Bancorp, Inc., a Delaware corporation ("FBI").
RECITALS
A. The Plan. DCB and FBI have entered into an Agreement and Plan of Merger,
dated as of July 18, 1998 (the "Plan"), providing for, among other things, the
merger of FBI with and into DCB, with DCB being the surviving corporation.
B. Condition to Plan. As a condition and an inducement to DCB's execution
and delivery of the Plan, DCB has required that FBI agree, and FBI has agreed,
to grant DCB the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, FBI and DCB agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth herein,
FBI hereby grants to DCB an irrevocable option (the "Option") to purchase up to
339,627 shares of common stock, par value $0.01 per share ("FBI Common Stock"),
of FBI (as adjusted as set forth herein, the "Option Shares," which shall
include the Option Shares before and after any transfer of such Option Shares,
but in no event shall the number of Option Shares for which this Option is
exercised exceed 19.9% of the issued and outstanding shares of FBI Common
Stock), at a purchase price per Option Share (as adjusted as set forth herein,
the "Purchase Price") equal to $32.00.
3. Exercise of Option.
(a) Provided that (i) DCB or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of Option Shares issued by any
court of competent jurisdiction in the United States shall be in effect, the
Holder may exercise the Option, in whole or in part, at any time and from time
to time, following
the occurrence of a Purchase Event (as hereinafter defined) which occurs prior
to the occurrence of an Exercise Termination Event (as hereinafter defined);
provided, that the Holder shall have sent written notice of such exercise (as
provided in subsection (e) of this Section 3) within 120 days after the first
Purchase Event of which DCB has been notified. The Option shall terminate and be
of no further force or effect upon the earliest to occur of the following (each
an "Exercise Termination Event"): (A) the Effective Time, (B) termination of the
Plan in accordance with the terms thereof prior to the occurrence of a Purchase
Event or a Preliminary Purchase Event other than a termination thereof by DCB
pursuant to Section 9.1(f) of the Plan (a termination of the Plan by DCB
pursuant to such Section of the Plan, being referred to herein as a "Default
Termination"), (C) 12 months after a Default Termination or (D) 12 months after
termination of the Plan (other than a Default Termination) following the
occurrence of a Purchase Event or a Preliminary Purchase Event; provided,
however, that any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable law; provided further, however, that if
the Option cannot be exercised on any day because of an injunction, order or
similar restraint issued by a court of competent jurisdiction, the period during
which the Option may be exercised shall be extended so that the Option shall
expire no earlier than the tenth business day after such injunction, order or
restraint shall have been dissolved or when such injunction, order or restraint
shall have become permanent and no longer subject to appeal, as the case may be.
The term "Holder" shall mean the holder or holders of the Option from time to
time, and which initially is DCB. The rights set forth in Sections 8 and 9 of
this Agreement shall terminate when the right to exercise the Option and
Substitute Option terminate (other than as a result of a complete exercise of
the Option or Substitute Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following events
occurring after the date hereof:
(i) Without DCB's prior written consent, FBI shall have recommended,
publicly proposed or publicly announced an intention to authorize,
recommend or propose, or FBI shall have entered into an agreement with any
person (other than DCB or any subsidiary of DCB) to effect (A) a merger,
consolidation or similar transaction involving FBI or any of its
significant subsidiaries, (B) the disposition, by sale, lease, exchange or
otherwise, of assets or deposits of FBI or any of its significant
subsidiaries representing in either case all or substantially all of the
consolidated assets or deposits of FBI and its subsidiaries or (C) the
issuance, sale or other disposition by FBI of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 20% or more of the voting power of FBI or any of its
significant subsidiaries (each of (A), (B) or (C), an "Acquisition
Transaction"); provided, however, that in no event shall any merger,
consolidation, purchase or similar transaction involving only FBI and one
or more of the Subsidiaries of FBI, or involving only any two or more of
such Subsidiaries be deemed to be an Acquisition Transaction, provided that
any such transaction is not entered into in violation of the terms of the
Plan; or
(ii) Any person (other than DCB or any subsidiary of DCB) shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3
promulgated under the Securities and Exchange Act of 1934 (the "Exchange
Act")) of, or the right to acquire
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beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act), other than a group of which DCB or any
subsidiary of DCB is a member, shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 20% or more of
the voting power of FBI or any of its significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) Any person (other than DCB or any subsidiary of DCB) shall have
commenced (as such term is defined in Rule 14d-2, promulgated under the
Exchange Act) or shall have filed a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to,
a tender offer or exchange offer to purchase any shares of FBI Common Stock
such that, upon consummation of such offer, such person would own or
control 10% or more of the then outstanding shares of FBI Common Stock
(such an offer being referred to herein as a "Tender Offer" or an "Exchange
Offer," respectively); or
(ii) The stockholders of FBI shall not have approved the Plan by the
requisite vote at the stockholders meeting of FBI called for that purpose
("Company Meeting"), the Company Meeting shall not have been held or shall
have been canceled prior to termination of the Plan or FBI's Board of
Directors shall have publicly withdrawn or modified in a manner adverse to
DCB the recommendation of FBI's Board of Directors with respect to the
Plan, in each case after it shall have been publicly announced that any
person (other than DCB or any subsidiary of DCB) shall have (A) made, or
disclosed an intention to make, a bona fide proposal to engage in an
Acquisition Transaction (which solely for purposes of this Section 3(c)
shall have the same meaning as in Section 3(b) except that the reference to
20% shall be changed to 10%) or (B) filed an application (or given a
notice), whether in draft or final form, under the Home Owners' Loan Act of
1933, as amended, the Bank Holding Company Act, as amended, the Bank Merger
Act, as amended or the Change in Bank Control Act of 1978, as amended, for
approval to engage in an Acquisition Transaction; or
(iii) Any person (other than DCB or any subsidiary of DCB) shall have
made a bona fide proposal to FBI or its stockholders by public
announcement, or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction; or
(iv) After a proposal is made by a third party to FBI or its
stockholders to engage in an Acquisition Transaction, or such third party
states its intention to FBI to make such a proposal if the Plan terminates,
FBI shall have breached any covenant or agreement contained in the Plan and
such breach (x) would entitle DCB to terminate the Plan under Section
9.1(f) thereof and (y) shall not have been cured prior to the Notice Date
(as defined below).
As used in this Agreement, the term "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
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(d) FBI shall notify DCB promptly in writing of the occurrence of any
Preliminary Purchase Event or Purchase Event of which it has knowledge, it being
understood that the giving of such notice by FBI shall not be a condition to the
right of Holder to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it shall send to FBI
a written notice (the "Stock Exercise Notice," the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of Option
Shares it intends to purchase pursuant to such exercise and (ii) a place and
date not earlier than three business days nor later than 15 business days from
the Notice Date for the closing (the "Closing") of such purchase (such date as
it may be extended pursuant to the next sentence, the "Closing Date"). If prior
notification to or approval of any Regulatory Authority is required in
connection with any such purchase, FBI shall cooperate with the Holder in the
filing of the required notice of application for approval and the obtaining of
such approval, and the Closing shall occur promptly following such regulatory
approvals and any mandatory waiting periods. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to FBI, in immediately
available funds by wire transfer to a bank account designated by FBI, an amount
equal to the Purchase Price multiplied by the number of Option Shares to be
purchased on such Closing Date and (ii) present and surrender this Agreement to
FBI at the address of FBI specified in Section 13(f) of this Agreement.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a) of
this Agreement, (i) FBI shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all Liens (as defined in the
Plan) and subject to no preemptive rights, and (B) if the Option is exercised in
part only, an executed new agreement with the same terms as this Agreement
evidencing the right to purchase the balance of the shares of FBI Common Stock
purchasable hereunder, and (ii) Holder shall deliver to FBI a letter agreeing
that Holder shall not offer to sell or otherwise dispose of such Option Shares
in violation of applicable federal and state law or of the provisions of this
Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF JULY 18, 1998. A COPY OF
SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT
BY FINANCIAL BANCORP, INC. OF A WRITTEN REQUEST THEREFOR.
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It is understood and agreed that the portion of the above legend relating to the
Securities Act shall be removed by delivery of substitute certificate(s) without
such legend if Holder shall have delivered to FBI a copy of a letter from the
staff of the Securities Exchange Commission (the "SEC"), or an opinion of
counsel in form and substance reasonably satisfactory to FBI and its counsel, to
the effect that such legend is not required for purposes of the Securities Act.
(d) Upon the giving by Holder to FBI of the Stock Exercise Notice, the
tender of the applicable purchase price in immediately available funds and the
tender of this Agreement to FBI, Holder shall be deemed to be the holder of
record of the shares of FBI Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of FBI shall then be closed or
that certificates representing such shares of FBI Common Stock shall not then be
actually delivered to Holder. FBI shall pay all expenses, and any and all United
States 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 4 in the name of Holder or its assignee, transferee or
designee.
(e) FBI agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of FBI
Common Stock so that the Option may be exercised without additional
authorization of FBI Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase FBI 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 hereunder by
FBI, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all applicable premerger notification, reporting
and waiting period requirements and (B) in the event, under any applicable
federal or state banking law, prior approval of or notice to any Regulatory
Authority is necessary before the Option may be exercised, cooperating fully
with Holder in preparing such applications or notices and providing such
information to such Regulatory Authority as it may require) in order to permit
Holder to exercise the Option and FBI duly and effectively to issue shares of
FBI Common Stock pursuant hereto and (iv) promptly to take all action provided
herein to protect the rights of Holder against dilution.
5. Representations and Warranties of FBI. FBI hereby represents and
warrants to DCB (and Holder, if different than DCB) as follows:
(a) Corporate Authority. FBI has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of FBI, and no other corporate
proceedings on the part of FBI are necessary to authorize this Agreement or
to consummate the transactions so contemplated; this Agreement has been
duly and validly executed and delivered by FBI.
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(b) Beneficial Ownership. To the best knowledge of FBI, as of the date
of this Agreement, no person or group has beneficial ownership of more than
10% of the issued and outstanding shares of FBI Common Stock.
(c) Shares Reserved for Issuance; Capital Stock. FBI has taken all
necessary corporate action to authorize and reserve and permit it to issue,
and at all times from the date hereof through the termination of the Option
in accordance with Section 3(a) of this Agreement, will have reserved for
issuance upon the exercise of the Option, that number of shares of FBI
Common Stock equal to the maximum number of Option Shares at any time and
from time to time purchasable upon exercise of the Option, and all such
Option Shares, upon issuance pursuant to the Option, will be duly
authorized, validly issued, fully paid and nonassessable, and will be
delivered free and clear of all claims, liens, encumbrances and security
interests (other than those created by this Agreement) and not subject to
any preemptive rights.
(d) No Violations. The execution, delivery and performance of this
Agreement does not and will not, and the consummation by FBI of any of the
transactions contemplated hereby will not, constitute or result in (i) a
breach or violation of, or a default under, its certificate of
incorporation or bylaws, or the comparable governing instruments of any of
its subsidiaries, or (ii) a breach or violation of, or a default under, any
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation of it or any of its subsidiaries (with or without the giving of
notice, the lapse of time or both) or under any governmental or
non-governmental permit or license to which it or any of its subsidiaries
is subject, that would, in any case, give any other person the ability to
prevent or enjoin FBI's performance under this Agreement in any material
respect.
6. Representations and Warranties of DCB. (a) DCB hereby represents and
warrants to FBI that DCB has full corporate power and authority to enter into
this Agreement and, subject to obtaining the approvals referred to in this
Agreement, to consummate the transactions contemplated by this Agreement; the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of DCB; and this Agreement has been duly executed
and delivered by DCB.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by DCB upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
7. Adjustment upon Changes in FBI Capitalization, Etc.
(a) In the event of any change in FBI Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares, exercise of the Company Rights or similar transaction, the type and
number of shares or securities subject to the Option, and the Purchase Price
therefor, shall be adjusted appropriately, and proper provision
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shall be made in the agreements governing any such transaction so that Holder
shall receive, upon exercise of the Option, the number and class of shares or
other securities or property that Holder would have received in respect of FBI
Common Stock if the Option had been exercised immediately prior to such event,
or the record date therefor, as applicable. If any additional shares of FBI
Common Stock are issued after the date of this Agreement (other than pursuant to
an event described in the first sentence of this Section 7(a), upon exercise of
any option to purchase FBI Common Stock outstanding on the date hereof or upon
conversion into FBI Common Stock of any convertible security of FBI outstanding
on the date hereof), the number of shares of FBI Common Stock subject to the
Option shall be adjusted so that, after such issuance, the Option, together with
any shares of FBI Common Stock previously issued pursuant hereto, equals 19.9%
of the number of shares of FBI Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option. No
provision of this Section 7 shall be deemed to affect or change, or constitute
authorization for any violation of, any of the covenants or representations in
the Plan.
(b) In the event that FBI shall enter into an agreement (i) to consolidate
with or merge into any person, other than DCB or one of its subsidiaries, and
FBI shall not be the continuing or surviving corporation of such consolidation
or merger, (ii) to permit any person, other than DCB or one of its subsidiaries,
to merge into FBI and FBI shall be the continuing or surviving corporation, but,
in connection with such merger, the then outstanding shares of FBI Common Stock
shall be changed into or exchanged for stock or other securities of FBI or any
other person or cash or any other property, or the outstanding shares of FBI
Common Stock immediately prior to such merger shall after such merger represent
less than 50% of the outstanding shares and share equivalents of the merged
company, or (iii) to sell or otherwise transfer all or substantially all of its
assets or deposits to any person, other than DCB or one of its subsidiaries,
then, and in each such case, the agreement governing such transaction shall make
proper provisions so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option (the "Substitute Option"), at the election of
Holder, to purchase shares of either (A) the Acquiring Corporation (as
hereinafter defined), (B) any person that controls the Acquiring Corporation or
(C) in the case of a merger described in clause (ii), FBI (such person being
referred to as "Substitute Option Issuer").
(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. Substitute Option Issuer shall also enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of Option Shares for
which the Option was theretofore exercisable, divided by the Average Price (as
hereinafter defined). The exercise price of the Substitute Option per share of
Substitute Common Stock (the "Substitute Option Price") shall be equal to the
Purchase Price multiplied by a fraction in which the numerator is the number of
shares
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of FBI Common Stock for which the Option was theretofore exercisable and the
denominator is the number of shares of the Substitute Common Stock for which the
Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or surviving
corporation of a consolidation or merger with FBI (if other than FBI), (B)
FBI in a merger in which FBI is the continuing or surviving person, or (C)
the transferee of all or substantially all of FBI's assets (or a
substantial part of the assets of its subsidiaries taken as a whole).
(ii) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power in respect of
the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.
(iii) "Assigned Value" shall mean the highest of (A) the price per
share of FBI Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (B) the price per share of FBI Common Stock to be
paid by any third party pursuant to an agreement with FBI, (C) the highest
closing price for shares of FBI Common Stock within the sixty-day period
immediately preceding the consolidation, merger or sale in question and (D)
in the event of a sale of all or substantially all of FBI's assets or
deposits, an amount equal to (x) the sum of the price paid in such sale for
such assets (and/or deposits) and the current market value of the remaining
assets of FBI, as determined by a nationally recognized investment banking
firm selected by Holder, divided by (y) the number of shares of FBI Common
Stock outstanding at such time. In the event that a Tender Offer or an
Exchange Offer is made for FBI Common Stock or an agreement is entered into
for a merger or consolidation involving consideration other than cash, the
value of the securities or other property issuable or deliverable in
exchange for FBI Common Stock shall be determined by a nationally
recognized investment banking firm selected by Holder and reasonably
satisfactory to FBI.
(iv) "Average Price" shall mean the average closing price of a share
of 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 FBI is the issuer of
the Substitute Option, the Average Price shall be computed with respect to
a share of common stock issued by FBI, the person merging into FBI or by
any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
number of shares of Substitute Common Stock for which the Substitute Option is
exercisable exceed 19.9% of the issued and outstanding shares of Substitute
Common Stock immediately prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more
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than 19.9% of the issued and outstanding shares of Substitute Common Stock but
for the limitation in the first sentence of this Section 7(f), 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 the first
sentence of this Section 7(f) over (ii) the value of the Substitute Option after
giving effect to the limitation in the first sentence of this Section 7(f). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by Holder.
(g) FBI shall not enter into any transaction described in Section 7(b) of
this Agreement unless the Acquiring Corporation and any person that controls the
Acquiring Corporation assume in writing all the obligations of FBI hereunder and
take all other actions that may be necessary so that the provisions of this
Section 7 are given full force and effect (including, without limitation, any
action that may be necessary so that the holders of the other shares of common
stock issued by Substitute Option Issuer are not entitled to exercise any rights
by reason of the issuance or exercise of the Substitute Option and the shares of
Substitute Common Stock are otherwise in no way distinguishable from or have
lesser economic value (other than any diminution in value resulting from the
fact that the shares of Substitute Common Stock are restricted securities, as
defined in Rule 144, promulgated under the Securities Act ("Rule 144"), or any
successor provision) than other shares of common stock issued by Substitute
Option Issuer).
(h) Notwithstanding anything herein to the contrary, in the event that FBI
completes a reorganization involving the formation of a holding company for FBI,
the agreement governing such transaction shall make proper provisions so that
the Option shall, upon the consummation of any such transaction and upon the
terms and conditions set forth herein, be converted into, or exchanged for, an
option granted by such holding company.
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a) of this Agreement, at the
request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d) hereof) and ending 12 months
immediately thereafter, FBI shall repurchase from Holder (i) the Option and (ii)
all shares of FBI Common Stock purchased by Holder pursuant hereto with respect
to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 8 is referred to as the "Section 8
Request Date." Such repurchase shall be at an aggregate price (the "Section 8
Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for any shares of FBI
Common Stock acquired pursuant to the Option with respect to which Holder
then has beneficial ownership;
(ii) The excess, if any, of (A) the Applicable Price (as defined
below) for each share of FBI Common Stock over (B) the Purchase Price
(subject to adjustment pursuant to Section 7 of this Agreement), multiplied
by the number of shares of FBI Common Stock with respect to which the
Option has not been exercised; and
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(iii) The excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7 of this Agreement) paid
(or, in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of FBI Common Stock with respect to which the Option has been
exercised and with respect to which Holder then has beneficial ownership,
multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, FBI shall, within
10 business days after the Section 8 Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment, Holder shall surrender to FBI the Option and the certificates
evidencing the Option Shares purchased thereunder with respect to which Holder
then has beneficial ownership, and Holder shall warrant that it has sole record
and beneficial ownership of such shares and that the same are then free and
clear of all Liens. Notwithstanding the foregoing, to the extent that prior
notification to or approval of any Regulatory Authority is required in
connection with the payment of all or any portion of the Section 8 Repurchase
Consideration, Holder shall have the ongoing option to revoke its request for
repurchase pursuant to this Section 8, in whole or in part, or to require that
FBI deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval). If any Regulatory
Authority disapproves of any part of FBI's proposed repurchase pursuant to this
Section 8, FBI shall promptly give notice of such fact to Holder and Holder
shall have the right (i) to revoke the repurchase request or (ii) to the extent
permitted by such Regulatory Authority, determine whether the repurchase should
apply to the Option and/or Option Shares and to what extent to each, and Holder
shall thereupon have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Section 8 Request Date less
the number of shares covered by the Option in respect of which payment has been
made pursuant to Section 8(a)(ii) of this Agreement. Holder shall notify FBI of
its determination under the preceding sentence within five business days of
receipt of notice of disapproval of the repurchase. Notwithstanding anything
herein to the contrary, in the event that FBI delivers to the Holder written
notice accompanied by a certification of FBI's independent auditor each stating
that a requested repurchase of FBI Common Stock would result in the recapture of
FBI's bad debt reserves under the Internal Revenue Code of 1986, as amended,
Holder's repurchase request shall be deemed to be automatically revoked.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 8 shall terminate on the date of termination of this Option
pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of FBI Common Stock paid for any such
share by the person or groups described in Section 8(d)(i) hereof, (ii) the
price per share of FBI Common Stock received by holders of FBI Common Stock in
connection with any merger, sale or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this Agreement, or (iii)
the highest closing sales price per share of FBI Common Stock quoted on The
Nasdaq Stock
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Market ("Nasdaq") (or if FBI Common Stock is not quoted on Nasdaq, the highest
bid price per share as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by Holder) during the 40 business days preceding the Section 8 Request
Date; provided, however, that in the event of a sale of less than all of FBI's
assets, the Applicable Price shall be the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of FBI as
determined by a nationally recognized investment banking firm selected by
Holder, divided by the number of shares of the FBI Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by Holder and
reasonably acceptable to FBI, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person (other
than DCB or any subsidiary of DCB) shall have acquired beneficial ownership of
(as such term is defined in Rule 13d-3 promulgated under the Exchange Act), or
the right to acquire beneficial ownership of, or any "group" (as such term is
defined under the Exchange Act) shall have been formed which beneficially owns
or has the right to acquire beneficial ownership of, 50% or more of the then
outstanding shares of FBI Common Stock, or (ii) any of the transactions
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this Agreement shall be
consummated.
9. Repurchase of Substitute Option.
(a) Subject to the last sentence of Section 3(a) of this Agreement, at the
request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d) hereof) and ending 12 months
immediately thereafter, Substitute Option Issuer (or any successor entity
thereof) shall repurchase from Holder (i) the Substitute Option and (ii) all
shares of Substitute Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 9 is referred to as the "Section 9
Request Date." Such repurchase shall be at an aggregate price (the "Section 9
Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for any shares of
Substitute Common Stock acquired pursuant to the Substitute Option with
respect to which Holder then has beneficial ownership;
(ii) The excess, if any, of (A) the Highest Closing Price (as defined
below) for each share of Substitute Common Stock over (B) the Purchase
Price (subject to adjustment pursuant to Section 7 of this Agreement),
multiplied by the number of shares of Substitute Common Stock with respect
to which the Substitute Option has not been exercised; and
(iii) The excess, if any, of the Highest Closing Price over the
Purchase Price (subject to adjustment pursuant to Section 7 of this
Agreement) paid (or, in the case of Substitute Option Shares with respect
to which the Substitute Option has been exercised
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but the Closing Date has not occurred, payable) by Holder for each share of
Substitute Common Stock with respect to which the Substitute Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 9, Substitute Option
Issuer shall, within 10 business days after the Section 9 Request Date, pay the
Section 9 Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to Substitute Option
Issuer the Substitute Option and the certificates evidencing the shares of
Substitute Common Stock purchased thereunder with respect to which Holder then
has beneficial ownership, and Holder shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then free and clear of
all Liens. Notwithstanding the foregoing, to the extent that prior notification
to or approval of any Regulatory Authority is required in connection with the
payment of all or any portion of the Section 9 Repurchase Consideration, Holder
shall have the ongoing option to revoke its request for repurchase pursuant to
this Section 9, in whole or in part, or to require that Substitute Option Issuer
deliver from time to time that portion of the Section 9 Repurchase Consideration
that it is not then so prohibited from paying and promptly file the required
notice or application for approval and expeditiously process the same (and each
party shall cooperate with the other in the filing of any such notice or
application and the obtaining of any such approval). If any Regulatory Authority
disapproves of any part of Substitute Option Issuer's proposed repurchase
pursuant to this Section 9, Substitute Option Issuer shall promptly give notice
of such fact to Holder and Holder shall have the right (i) to revoke the
repurchase request or (ii) to the extent permitted by such Regulatory Authority,
determine whether the repurchase should apply to the Substitute Option and/or
Substitute Option Shares and to what extent to each, and Holder shall thereupon
have the right to exercise the Substitute Option as to the number of Substitute
Option Shares for which the Substitute Option was exercisable at the Section 9
Request Date less the number of shares covered by the Substitute Option in
respect of which payment has been made pursuant to Section 9(a)(ii) of this
Agreement. Holder shall notify Substitute Option Issuer of its determination
under the preceding sentence within five business days of receipt of notice of
disapproval of the repurchase. Notwithstanding anything herein to the contrary,
in the event that Substitute Option Issuer delivers to the Holder written notice
accompanied by a certification of Substitute Option Issuer's independent auditor
each stating that a requested repurchase of FBI Common Stock would result in the
recapture of Substitute Option Issuer's bad debt reserves under the Internal
Revenue Code of 1986, as amended, Holder's repurchase request shall be deemed to
be automatically revoked.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 9 shall terminate on the date of termination of this
Substitute Option pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Highest Closing Price" means the
highest of closing sales price for shares of Substitute Common Stock quoted on
Nasdaq (or if the Substitute Common Stock is not quoted on Nasdaq, on the
principal trading market on which such
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shares are traded as reported by a recognized source) during the six-month
period preceding the Section 9 Request Date.
10. Registration Rights.
(a) Demand Registration Right. FBI shall, subject to the conditions of
Section 10(c) of this Agreement, if requested by any Holder, including DCB and
any permitted transferee ("Selling Shareholder"), promptly prepare and file a
registration statement under the Securities Act, if such registration is
necessary in order to permit the sale or other disposition of any or all shares
of FBI Common Stock or other securities that have been acquired by or are
issuable to the Selling Shareholder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by the Selling
Shareholder in such request, including without limitation a "shelf" registration
statement under Rule 415, promulgated under the Securities Act, or any successor
provision, and FBI shall use its reasonable best efforts to qualify such shares
or other securities for sale under any applicable state securities laws.
(b) Additional Registration Rights. If FBI at any time after the exercise
of the Option proposes to register any shares of FBI Common Stock under the
Securities Act, in connection with an underwritten public offering of such FBI
Common Stock, FBI will promptly give written notice to the Selling Shareholders
of its intention to do so and, upon the written request of any Selling
Shareholder given within 30 days after receipt of any such notice (which request
shall specify the number of shares of FBI Common Stock intended to be included
in such underwritten public offering by the Selling Shareholder), FBI will cause
all such shares for which a Selling Shareholder requests participation in such
registration, to be so registered and included in such underwritten public
offering; provided, however, that FBI may elect to not cause any such shares to
be so registered (i) if the underwriters in good faith object for valid business
reasons, or (ii) in the case of a registration solely to implement an employee
benefit plan or a registration filed on Form S-4 of the Securities Act or any
equivalent or successor Form. If some, but not all the shares of FBI Common
Stock, with respect to which FBI shall have received requests for registration
pursuant to this Section 10(b), shall be excluded from such registration, FBI
shall make appropriate allocation of shares to be registered among the Selling
Shareholders desiring to register their shares pro rata in the proportion that
the number of shares requested to be registered by each such Selling Shareholder
bears to the total number of shares requested to be registered by all such
Selling Shareholders then desiring to have FBI Common Stock registered for sale.
(c) Conditions to Required Registration. FBI shall use all reasonable
efforts to cause each registration statement referred to in Section 10(a) of
this Agreement to become effective and to obtain all consents or waivers of
other parties which are required therefor and to keep such registration
statement effective, provided, however, that FBI shall not be required to
register Option Shares under the Securities Act pursuant to Section 10(a)
hereof:
(i) Prior to a Purchase Event;
(ii) On more than one occasion;
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(iii) Within 90 days after the effective date of a registration
referred to in Section 9(b) of this Agreement pursuant to which the Selling
Shareholder or Selling Shareholders concerned were afforded the opportunity
to register such shares under the Securities Act and such shares were
registered as requested; and
(iv) Unless a request therefor is made to FBI by Selling Shareholders
that hold at least 25% or more of the aggregate number of Option Shares
(including shares of FBI Common Stock issuable upon exercise of the Option)
then outstanding.
Notwithstanding the foregoing, if, at the time of any request by DCB for
registration of the Option or Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering 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 inclusion of the Holder's Option or 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 hereby may be reduced; provided, however, that after any
such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer in the aggregate (the
"Cutback"); and provided further, however, that if such reduction occurs, then
the Issuer shall file a registration statement for the balance of the Option
Shares as promptly as practicable and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder.
In addition to the foregoing, FBI shall not be required to maintain the
effectiveness of any registration statement after the expiration of six months
from the effective date of such registration statement. FBI shall use all
reasonable efforts to make any filings, and take all steps, under all applicable
state securities laws to the extent necessary to permit the sale or other
disposition of the Option Shares so registered in accordance with the intended
method of distribution for such shares; provided, however, that FBI shall not be
required to consent to general jurisdiction or qualify to do business in any
state where it is not otherwise required to so consent to such jurisdiction or
to so qualify to do business.
(d) Expenses. Except where applicable state law prohibits such payments,
FBI will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of counsel), legal expenses (not to exceed $5,000), including the reasonable
fees and expenses of one counsel to the holders whose Option Shares are being
registered, printing expenses and the costs of special audits or "cold comfort"
letters, expenses of underwriters, excluding discounts and commissions, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to Section 10(a) or 10(b) of this Agreement
(including the related offerings and sales by holders of Option Shares) and all
other qualifications, notifications or exemptions pursuant to Section 10(a) or
10(b) of this Agreement.
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(e) Indemnification. In connection with any registration pursuant to this
Section 10, Issuer and Grantee shall provide each other and the underwriter of
the offering with customary representations, warranties, covenants,
indemnification and contribution in connection with such registration
customarily included in secondary offering underwriting agreements.
(f) Miscellaneous Reporting. FBI shall use its reasonable best efforts to
comply with all reporting requirements and will do all such other things as may
be necessary to permit the expeditious sale at any time of any Option Shares by
the Selling Shareholders thereof in accordance with and to the extent permitted
by any rule or regulation promulgated by the SEC from time to time, including,
without limitation, Rule 144. FBI shall at its expense provide the Selling
Shareholders with any information necessary in connection with the completion
and filing of any reports or forms required to be filed by them under the
Securities Act or the Exchange Act, or required pursuant to any state securities
laws or the rules of any stock exchange.
(g) Issue Taxes. FBI will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save the Selling Shareholders harmless, without
limitation as to time, against any and all liabilities, with respect to all such
taxes.
11. Quotation; Listing. If FBI Common Stock or any other securities to be
acquired in connection with the exercise of the Option are then authorized for
quotation or trading or listing on Nasdaq or any securities exchange, FBI, upon
the request of Holder, will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of FBI Common Stock or
other securities to be acquired upon exercise of the Option on Nasdaq or such
other securities exchange and will use its reasonable best efforts to obtain
approval, if required, of such quotation or listing as soon as practicable.
12. Division of Option. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of FBI for other Agreements
providing for Options of different denominations entitling the holder thereof to
purchase in the aggregate the same number of shares of FBI Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein include
any other Agreements and related Options for which this Agreement (and the
Option granted hereby) may be exchanged. Upon receipt by FBI 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, FBI 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 FBI, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
13. Profit Limitation. (a) Notwithstanding any other provision of this
agreement, in no event shall DCB's Total Profit (as hereinafter defined) exceed
$4 million, and, if it otherwise would exceed such amount, DCB, at its sole
election, shall either (a) deliver to FBI for cancellation Option Shares
previously purchased by DCB, (b) pay cash or other consideration to FBI
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or (c) undertake any combination thereof, so that DCB's Total Profit shall not
exceed $4 million after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of Option Shares as would, as of the Notice Date,
result in a Notional Total Profit (as defined below) of more than $4 million,
and, if exercise of the Option otherwise would exceed such amount, DCB, at its
discretion, may increase the Purchase Price for that number of Shares set forth
in the Stock Exercise Notice so that the Notional Total Profit shall not exceed
$4 million; provided, that nothing in this sentence shall restrict any exercise
of the Option permitted hereby on any subsequent date at the Purchase Price set
forth in Section 2 hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) (x) the amount received by DCB pursuant to
the repurchase of Option Shares pursuant to Section 8 or Section 9 hereof, less
(y) DCB's purchase price for such Option Shares, (ii) (z) the net cash amounts
received by DCB pursuant to the sale of Option Shares (or any other securities
into which such Option Shares are converted or exchanged) to any unaffiliated
party, less (y) DCB's purchase price for such Option Shares, (iii) the amount
received by DCB pursuant to the repurchase of the Option to Section 8 or 9, (iv)
any amounts received by DCB on the transfer of the Option (or any portion
thereof) to any unaffiliated party and (v) any equivalent amount with respect to
the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Option Shares as to which DCB may propose to exercise this Option
shall be the Total Profit determined as of the date of the Stock Exercise Notice
assuming that this Option were exercised on such date for such number of Shares
and assuming that such Option Shares, together with all other Option Shares held
by DCB and its affiliates as of such date, were sold for cash at the closing
market price for the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
14. Miscellaneous.
(a) Expenses. Except to the extent expressly provided for 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) Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) Entire Agreement: No Third-Party Beneficiaries; Severability. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between DCB and FBI (i) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof and (ii)
is not intended to confer upon any person other than the parties hereto (other
than the indemnified parties under Section 10(e) of this Agreement and any
transferees of the Option Shares or any permitted transferee of this Agreement
pursuant to Section
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14(h) of this Agreement) any rights or remedies hereunder. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or Regulatory Authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of 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 Authority determines that the Option does not permit Holder to
acquire, or does not require FBI to repurchase, the full number of shares of FBI
Common Stock as provided in Section 3 of this Agreement (as may be adjusted
herein), it is the express intention of FBI to allow Holder to acquire or to
require FBI to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Plan (or at such
other address for a party as shall be specified by like notice).
(g) Counterparts. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
(i) Further Assurances. In the event of any exercise of the Option by the
Holder, FBI, and the Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief and
other equitable relief. Both parties further agree to waive any requirement for
the securing or posting of any bond
-17-
in connection with the obtaining of any such equitable relief and that this
provision is without prejudice to any other rights that the parties hereto may
have for any failure to perform this Agreement.
-18-
IN WITNESS WHEREOF, FBI and DCB have caused this Stock Option Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
day and year first written above.
FINANCIAL BANCORP, INC.
By: /s/ XXXXX X. XXXXXXXX
------------------------------------
Name Xxxxx X. Xxxxxxxx
Title President/CEO
DIME COMMUNITY BANCSHARES, INC.
By: /s/ XXXXXXX X. PABGIANO
------------------------------------
Name Xxxxxxx X. Pabgiano
Title Chairman/CEO
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