STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Agreement"), is made as of the 14th day
of October, 1997, between CNB BANCSHARES, INC., an Indiana corporation
("Grantee"), and PINNACLE FINANCIAL SERVICES, INC., a Michigan corporation
("Issuer").
RECITALS
A. Grantee and Issuer are entering into an Agreement and Plan of Merger,
dated as of the date hereof (the "Plan"), which is being executed by the parties
hereto simultaneously with the execution of this Agreement.
B. As a condition and inducement to Grantee's entering into the Plan and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
defined below).
C. In consideration of the foregoing and the mutual covenants and
agreements set forth herein and in the Plan, the parties hereto agree as
follows:
SECTION 1. GRANT OF OPTION. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to purchase, subject to the
terms hereof, up to 2,000,000 fully paid and nonassessable shares of Common
Stock, no par value per share (the "Common Stock"), of Issuer at a price per
share equal to $37.00 per share (the "Initial Price"); PROVIDED, HOWEVER, that
in the event Issuer issues or agrees to issue (other than pursuant to options
and warrants to issue Common Stock or shares of convertible stock convertible
into shares of Common Stock in effect or outstanding as of the date hereof or
permitted to be granted under Section 4.01(b)(i) of the Plan) any shares of
Common Stock at a price less than the Initial Price (as adjusted pursuant to
Section 5(b)), such price shall be equal to such lesser price (such price, as
adjusted as hereinafter provided, the "Option Price"). The number of shares of
Common Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and the Plan and other than pursuant to an event
described in Section 5(a) hereof), the number of shares of Common Stock subject
to the Option shall be increased so that, after such issuance, such number
together with any shares of Common Stock previously issued pursuant hereto,
represents the same proportion of the number of shares of Common Stock then
issued and outstanding as such proportion before the event referred to above
(without giving effect to any shares subject or issued pursuant to the Option).
Nothing contained in this Section l(b) or elsewhere in this Agreement shall be
deemed to authorize Issuer to issue shares in breach of any provision of the
Plan.
SECTION 2. EXERCISE OF OPTION.
(A) TIMING OF EXERCISE, TERMINATION. Grantee may exercise the
Option, in whole or part, at any time and from time to time following the
occurrence of a Purchase Event (as defined below); PROVIDED that the Option
shall terminate and be of no further force and effect upon the earliest to occur
of (i) the time immediately prior to the Effective Time, (ii) 12 months after
the first occurrence of a Purchase Event, (iii) 18 months after the termination
of the Plan following the occurrence of a Preliminary Purchase Event (as defined
below), (iv) 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 of the Plan by Grantee pursuant to Section 7.02 thereof or by
Grantee and Issuer pursuant to Section 7.01 thereof if Grantee shall at that
time have been entitled to terminate the Plan pursuant to Section 7.02 thereof
(provided that the breach of Issuer giving rise to such termination or such
right to terminate was willful)) or (v) 18 months after the termination of the
Plan by Grantee pursuant to Section 7.02 thereof or by Grantee and Issuer
pursuant to Section 7.01 thereof if Grantee shall at that time have been
entitled to terminate the Plan pursuant to Section 7.02 thereof (provided that
the breach of Issuer giving rise to such termination or such right to terminate
was willful). The events described in clauses (i) - (v) in the preceding
sentence are hereinafter collectively referred to as an "Exercise Termination
Event."
(B) PRELIMINARY PURCHASE EVENT. The term "Preliminary Purchase Event"
shall mean any of the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its subsidiaries (each, 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 (the term "Person" for purposes of this Agreement
having the meaning assigned thereto in 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 (each a "Grantee Subsidiary") or the Board of Directors of
Issuer shall have recommended that the shareholders of Issuer approve or
accept any Acquisition Transaction with any Person other than Grantee or
any Grantee Subsidiary. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving Issuer or any Issuer Subsidiary that is a
significant subsidiary as defined in Rule 1-02 of Regulation S-X by the
Securities and Exchange Commission (and the term "significant subsidiary"
shall include, wherever used in this Agreement, any bank or other financial
institution subsidiary of Issuer), (y) a purchase, lease or other
acquisition of all or substantially all of the assets of or assumption of
all or substantially all the deposits of Issuer or any Issuer Subsidiary
that is a significant subsidiary, or (z) 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 that is a significant subsidiary, provided that the term
"Acquisition Transaction" does not include any internal merger or
consolidation, transfer or lease of assets or voting securities involving
only Issuer and/or Issuer Subsidiaries;
(ii) Any Person (other than Grantee or any Grantee Subsidiary, or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
business, or any other Person who as of the date hereof Beneficially Owns
(the term "Beneficial Ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Exchange Act, and the
rules and regulations thereunder) 10% or more of the outstanding shares of
Common Stock) shall have acquired Beneficial Ownership or the right to
acquire Beneficial Ownership, of shares of Common Stock such that, upon the
consummation of such acquisition, such Person would have Beneficial
Ownership, in the aggregate, of 10% or more of the then outstanding shares
of Common Stock, or, with respect to any Person who as of the date hereof
Beneficially Owns 10% or more of the outstanding shares of Common Stock,
such Person shall have acquired Beneficial Ownership or the right to
acquire Beneficial Ownership, of shares of Common Stock such that, upon the
consummation of such acquisition, such Person would have Beneficial
Ownership, in the aggregate, of 15% or more of the then outstanding shares
of Common Stock;
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(iii) Any Person other than Grantee or any Grantee Subsidiary shall
have made a BONA FIDE proposal to Issuer or its shareholders, by public
announcement or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction (including,
without limitation, any situation in which any Person other than Grantee or
any Grantee Subsidiary shall have commenced (as such term is defined in
Rule 14d-2 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 Common Stock such that, upon consummation of such offer, such
Person would own or control 10% or more of the then outstanding shares of
Common Stock (such an offer being referred to herein as a "Tender Offer" or
an "Exchange Offer", respectively));
(iv) After a proposal is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, or such third party
states its intention to make such a proposal if the Plan terminates and/or
the Option expires, Issuer shall have breached any covenant or obligation
contained in the Plan and such breach would entitle Grantee to terminate
the Plan (without regard to the cure period provided for therein unless
such cure is promptly effected without jeopardizing consummation of the
Merger pursuant to the terms of the Plan);
(v) The holders of Common Stock shall not have approved the Plan by
the requisite vote at the meeting of such stockholders held for the purpose
of voting on the Plan, or such meeting shall not have been held or shall
have been canceled prior to termination of the Plan, in each case after it
shall have been publicly announced that any Person (other than Grantee or
any Grantee Subsidiary) shall have (A) made, or disclosed an intention to
make, a proposal to engage in an Acquisition Transaction, (B) commenced a
Tender Offer or filed a registration statement under the Securities Act
with respect to an Exchange Offer, or (C) filed an application (or given a
notice) with, whether in draft or final form, the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") or any other
governmental authority or regulatory or administrative agency or commission
(each, a "Governmental Authority"), for approval to engage in an
Acquisition Transaction;
(vi) Any Person (other than Grantee or any Grantee Subsidiary), other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board or other Governmental Authority for approval to engage in an
Acquisition Transaction; or
(vii) Issuer's Board of Directors 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 stockholders
of Issuer approve the transactions contemplated by the Plan, or Issuer or
any significant Issuer Subsidiary shall have authorized, recommended,
proposed (or publicly announced its intention to authorize, recommend or
propose) an agreement to engage in an Acquisition Transaction between the
Issuer or any significant Issuer Subsidiary with any person other than
Grantee or a Grantee Subsidiary.
(C) PURCHASE EVENT. The term "Purchase Event" shall mean either of
the following events or transactions occurring after the date hereof:
(i) The acquisition by any Person (other than Grantee or any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity in the
ordinary course of business (provided that
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the foregoing exception shall not apply to any Person for whom or which
such Issuer Subsidiary is acting in such fiduciary capacity)) of Beneficial
Ownership of shares of Common Stock, such that, upon the consummation of
such acquisition, such Person would have Beneficial Ownership, in the
aggregate, of 20% or more of the then outstanding shares of Common Stock; or
(ii) The occurrence of a Preliminary Purchase Event described in
Section 2(b)(i) hereof except that the percentage referred to in clause (z)
shall be 20%.
(D) NOTICE BY ISSUER. Issuer shall notify Grantee promptly in
writing of the occurrence of any Preliminary Purchase Event or Purchase Event;
PROVIDED, HOWEVER, that the giving of such notice by Issuer shall not be a
condition to the right of Grantee to exercise the Option.
(E) NOTICE OF EXERCISE. In the event that Grantee is entitled to and
wishes to exercise the Option, it shall send to Issuer a written notice (the
"Option Notice" and the date of which being hereinafter referred to as the
"Notice Date") specifying (i) the total number of shares of Common Stock it will
purchase pursuant to such exercise, (ii) the aggregate purchase price as
provided herein, and (iii) a period of time (that shall not be less than three
business days nor more than thirty business days) running from the Notice Date
(the "Closing Date") and a place at which the closing of such purchase shall
take place; PROVIDED, THAT, if prior notification to or approval of the Federal
Reserve Board or any other Governmental Authority is required in connection with
such purchase (each, a "Notification" or an "Approval," as the case may be),
(a) Grantee shall promptly file, or cause to be filed, the required notice or
application for approval ("Notice/Application"), (b) Grantee shall expeditiously
process, or cause to be expeditiously processed, the Notice/Application, and
(c) for the purpose of determining the Closing Date pursuant to clause (iii) of
this sentence, the period of time that otherwise would run from the Notice Date
shall instead run from the later of (x) in connection with any Notification, the
date on which any required notification periods have expired or been terminated,
and (y) in connection with any Approval, the date on which such approval has
been obtained and any requisite waiting period or periods shall have expired.
For purposes of Section 2(a) hereof, any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto. On or prior to the Closing Date,
Grantee shall have the right to revoke its exercise of the Option in the event
that the transaction constituting a Purchase Event that gives rise to such right
to exercise shall not have been consummated.
(F) PAYMENTS. At the closing referred to in Section 2(e) hereof,
Grantee shall pay to Issuer the aggregate Option Price for the shares of Common
Stock specified in the Option Notice in immediately available funds by wire
transfer to a bank account designated by Issuer; PROVIDED, HOWEVER, that failure
or refusal of Issuer to designate such a bank account shall not preclude Grantee
from exercising the Option.
(G) DELIVERY OF COMMON STOCK. At such closing, subject to any
requisite Notification and/or Approval having been made or given and being in
full force and effect, Issuer shall deliver to Grantee a certificate or
certificates representing the number of shares of Common Stock specified in the
Option Notice and, if the Option should be exercised in part only, a new Option
evidencing the rights of Grantee thereof to purchase the balance of the shares
of Common Stock purchasable hereunder.
(H) COMMON STOCK CERTIFICATES. Certificates for Common Stock
delivered at a closing hereunder shall be endorsed with a restrictive legend
substantially as follows:
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The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended, and to certain provisions of an agreement between CNB
Bancshares, Inc. and Pinnacle Financial Services, Inc. ("Issuer")
dated as of the 14th day of October, 1997. 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 in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the Securities and Exchange
Commission, 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; 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.
(I) HOLDER OF RECORD. Upon the giving by Grantee to Issuer of an
Option Notice and the tender of the applicable purchase price in immediately
available funds on the Closing Date, subject to any requisite Notification
and/or Approval having been made or given and being in full force and effect,
Grantee shall be deemed to be the holder of record of the number of shares of
Common Stock specified in the Option Notice, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such shares of Common Stock shall not then actually be delivered to Grantee.
Issuer 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, issue and delivery of stock certificates under this Section 2 in
the name of Grantee.
SECTION 3. ISSUER'S COVENANTS.
(A) AVAILABLE SHARES. Issuer agrees that it shall at all times until
the termination of this Agreement have reserved for issuance upon the exercise
of the Option that number of authorized and reserved shares of Common Stock
equal to the maximum number of shares of Common Stock at any time and from time
to time issuable hereunder, all of which shares shall, upon issuance pursuant
hereto, be duly authorized, validly issued, fully paid, nonassessable, and
delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights.
(B) COMPLIANCE. Issuer agrees that it shall not, by amendment of its
articles of incorporation 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 Issuer.
(C) CERTAIN ACTIONS, APPLICATIONS AND ARRANGEMENTS. Issuer shall
promptly take all action as may from time to time be required (including (i)
complying with all premerger notification, reporting and waiting period
requirements specified in 15 U.S.C. Section 18a and regulations promulgated
thereunder, and (ii) in the event, under the Bank Holding Company Act of 1956,
as amended (the "B.H.C. Act"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any other Governmental Authority is necessary
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before the Option may be exercised, cooperating with Grantee in preparing
such applications or notices and providing such information to each such
Governmental Authority as it may require) in order to permit Grantee to
exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto, and to protect the rights of Grantee against dilution.
SECTION 4. EXCHANGE OF OPTION. This Agreement and the Option granted
hereby are exchangeable, without expense, at the option of Grantee, upon
presentation and surrender of this Agreement at the principal office of Issuer,
for other agreements providing for Options of different denominations entitling
the holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used in this Section 4 include any agreements and related options for which this
Agreement and the Option granted hereby 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 shall 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.
SECTION 5. ADJUSTMENTS. The number of shares of Common Stock purchasable
upon the exercise of the Option shall be subject to adjustment from time to time
as follows:
(a) In the event of any change in the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares or the like, the type and number of shares of
Common Stock purchasable upon exercise hereof shall be appropriately adjusted
and proper provision shall be made so that, in the event that any additional
shares of Common Stock are to be issued or otherwise to 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), it represents the same
proportion of the number of shares of Common Stock then issued and outstanding
as such proportion before the applicable event described in this Section 5(a).
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof 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 purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
SECTION 6. REGISTRATION RIGHTS. (a) Upon the occurrence of a Purchase
Event that occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee (whether on its own behalf or on behalf of any subsequent
holder of the Option (or part thereof) or any holder of the shares of Common
Stock issued pursuant hereto), promptly prepare, file and keep current a
registration statement under the Securities Act covering any shares issued and
issuable pursuant to the Option and shall use its best efforts to cause such
registration statement to become effective and remain current in order to permit
the sale or other disposition of any shares of Common Stock issued upon total or
partial exercise of the Option (the "Option Shares") in accordance with any plan
of disposition requested by Grantee. Issuer shall use
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its best efforts to cause such registration statement first 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.
Grantee shall have the right to demand two such registrations at Issuer's
expense. The foregoing notwithstanding, 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 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 offering or inclusion of the Option
Shares would interfere materially 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 Grantee
shall constitute at least 25% of the total number of shares of Common Stock
held by Grantee and Issuer covered in such registration statement; PROVIDED
FURTHER, HOWEVER, that if such reduction occurs, then Issuer shall file a
registration statement for the balance as promptly as practicable thereafter
as to which no reduction shall thereafter occur. In addition, if Issuer
proposes to register its Common Stock or any other securities on a form that
would permit the registration of the Option Shares for public sale under the
Securities Act (whether proposed to be offered for sale by Issuer or any
other Person) it shall give prompt written notice to Grantee of its intention
to do so, specifying the relevant terms of such proposal, including the
proposed maximum offering price thereof. Upon the written notice of Grantee
(whether on its own behalf or on behalf of any subsequent holder of the
Option (or part thereof) or any holder of the shares of Common Stock issued
pursuant hereto) delivered to Issuer within 20 business days after the giving
of any such notice, which request shall specify the number of Option Shares
desired to be disposed by Grantee, Issuer shall use its best efforts to
effect, in connection with its proposed registration, the registration under
the Securities Act of the Option Shares set forth in such request. Grantee
shall provide all information reasonably requested by Issuer for inclusion in
any registration statement to be filed hereunder. In connection with any
such registration, Issuer and Grantee shall provide each other with
representations, warranties, indemnities and other agreements customarily
given in connection with such registrations. If requested by Grantee in
connection with such registration, Issuer and Grantee shall become a party to
any underwriting agreement relating to the sale of such shares, but only to
the extent of obligating themselves in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements.
(b) In the event that Grantee requests Issuer to file a registration
statement following the failure to obtain any approval required to exercise the
Option as described in Section 9 hereof, the closing of the sale or other
disposition of the Common Stock or other securities pursuant to such
registration statement shall occur substantially simultaneously with the
exercise of the Option.
(c) Except where applicable state law prohibits such payments, Issuer
shall pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of counsel), legal expenses, 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 but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to this Section 6 (including the related
offerings and sales by holders of Option Shares) and all other qualifications,
notification or exemptions pursuant to this Section 6.
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(d) In connection with any registration under this Section 6, Issuer
hereby indemnifies Grantee, and each officer, director and controlling person of
Grantee, and each underwriter thereof, including each person, if any, who
controls such holder or underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement contained in any registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission, or alleged omission, to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Grantee, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement, that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such holder or such underwriter,
as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 6(d)
of notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 6(d), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 6(d). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party either agrees to pay the same, (ii) the indemnifying party
fails to assume the defense of such action with counsel reasonably satisfactory
to the indemnified party, or (iii) the indemnified party has been advised by
counsel that one or more legal defenses may be available to the indemnifying
party that may be contrary to the interests of the indemnified party. No
indemnifying party shall be liable for the fees and expenses of more than one
separate counsel for all indemnified parties or for any settlement entered into
without its consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 6(d) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative fault of Issuer,
Grantee and the underwriters in connection with the statements or omissions
which resulted in such expenses, losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The amount paid or payable by a
party as a result of the expenses, losses, claims, damages and liabilities
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim;
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PROVIDED, HOWEVER, that in no case shall Grantee be responsible, in the
aggregate, for any amount in excess of the net offering proceeds attributable
to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any Grantee
to indemnify shall be several and not joint with other holders of Option
Shares.
SECTION 7. OPTION REPURCHASE. (a) Upon the occurrence of a Purchase Event
that occurs prior to an Exercise Termination Event, (i) at the request (the date
of such request being the "Request Date") of Grantee, delivered within 30 days
of the Purchase Event (or such later period as may be provided pursuant to
Section 9 hereof), Issuer shall repurchase the Option from Grantee at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which the Option may then be exercised, and (ii) at
the request (the date of such request being the "Request Date") of the owner of
Option Shares from time to time (the "Owner"), delivered within 30 days of a
Purchase Event (or such later period as may be provided pursuant to Section 9
hereof), Issuer shall repurchase such number of the Option Shares from the Owner
as the 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 offer or exchange offer
therefor has been made after the date hereof and on or prior to the Request
Date, (ii) the price per share of Common Stock paid or to be paid by any third
party pursuant to an agreement with Issuer (whether by way of a merger,
consolidation or otherwise), (iii) the highest closing price for shares of
Common Stock within the 90-day period ending on the Request Date as reported on
The Nasdaq Stock Market's National Market (as reported in THE WALL STREET
JOURNAL (Midwest Edition) or, if not reported therein, in another mutually
agreed upon authoritative source), or (iv) in the event of a sale of all or
substantially all of Issuer's assets, the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of Issuer as
determined by a nationally-recognized independent investment banking firm
mutually selected by Grantee or the Owner, as the case may be, on the one hand,
and Issuer, on the other hand, 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 independent investment banking firm mutually selected by
Grantee or Owner, as the case may be, on the one hand, and Issuer, on the other
hand, whose determination shall be conclusive and binding on all parties.
(b) Grantee or the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and/or 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 Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7.
As immediately 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 Grantee the Option Repurchase Price or to the Owner the
Option Share Repurchase Price or the portion thereof that Issuer is not then
prohibited from so delivering under applicable law and regulation or as a
consequence of administrative policy.
(c) 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 any repurchase contemplated by
this Section 7. Nonetheless, to the extent that Issuer is prohibited under
9
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 Grantee and/or the Owner and thereafter deliver or cause
to be delivered, from time to time, to Grantee and/or the 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, HOWEVER, 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
Grantee and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full Grantee or Owner may revoke
its notice of repurchase of the Option or the Option Shares either in whole or
in part whereupon, in the case of a revocation in part, Issuer shall promptly
(i) deliver to Grantee and/or the Owner, as appropriate, that portion of the
Option Purchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering after taking into account any such revocation, and
(ii) deliver, as appropriate, either (A) to Grantee, a new Agreement evidencing
the right of Grantee to purchase that number of shares of Common Stock equal to
the number of shares of Common Stock purchasable immediately prior to the
delivery of the notice of repurchase less the number of shares of Common Stock
covered by the portion of the Option repurchased, or (B) to the Owner, a
certificate for the number of Option Shares covered by the revocation.
(d) Issuer shall not enter into any agreement with any party (other
than Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the
other party thereto assumes all the obligations of Issuer pursuant to this
Section 7 in the event that a Grantee or Owner elects, in its sole discretion,
to require such other party to perform such obligations.
SECTION 8. SUBSTITUTE OPTION.
(A) GRANT OF SUBSTITUTE OPTION. In the event that prior to an
Exercise Termination Event, Issuer shall enter into an agreement (i) to
consolidate or merge with any Person, other than Grantee or a Grantee
Subsidiary, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any Person, other than Grantee or a
Grantee Subsidiary, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, 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 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 or any
significant Issuer Subsidiary's assets to any Person, other than Grantee or a
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 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 Grantee, of either (x) the Acquiring Corporation
(as defined below), or (y) any Person that controls the Acquiring Corporation
(the Acquiring Corporation and any such controlling Person being hereinafter
referred to as the "Substitute Option Issuer").
(B) EXERCISE OF SUBSTITUTE OPTION. The Substitute Option shall be
exercisable for such number of shares of the Substitute Common Stock (as is
hereinafter defined) as is equal to the market/offer price (as defined in
Section 7 hereof), MULTIPLIED by the number of shares of the Common Stock for
which the Option was theretofore exercisable, DIVIDED by the Average Price (as
is hereinafter defined). The exercise price of the Substitute Option per share
of the Substitute Common Stock (the
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"Substitute Purchase Price") shall then be equal to the product of the Option
Price MULTIPLIED by a fraction in which the numerator is the number of shares
of Common Stock for which the Option was theretofore exercisable and the
denominator is the number of shares for which the Substitute Option is
exercisable.
(C) TERMS OF SUBSTITUTE OPTION. The Substitute Option shall
otherwise have the same terms as the Option, PROVIDED, HOWEVER, 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 Grantee.
(D) SUBSTITUTE OPTION DEFINITIONS. The following terms have the
meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving Person, and (iii) the transferee of all or any substantial part
of Issuer's assets (or the assets of any significant Issuer Subsidiary);
(ii) "Substitute Common Stock" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option; and
(iii) "Average Price" shall mean 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 the Substitute Common Stock on the day
preceding such consolidation, merger or sale; PROVIDED, HOWEVER, that if
such closing price is not ascertainable due to an absence of a public
market for the Substitute Common Stock, "Average Price" shall mean the
higher of (i) the price per share of Substitute Common Stock paid or to be
paid by any third party pursuant to an agreement with the issuer of the
Substitute Common Stock and (ii) the book value per share, calculated in
accordance with generally accepted accounting principles, of the Substitute
Common Stock immediately prior to exercise of the Substitute Option;
PROVIDED, FURTHER, 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 Issuer, the Person merging into Issuer or by any company which
controls or is controlled by such merging Person, as Grantee may elect.
(E) CAP ON SUBSTITUTE OPTION. In no event, pursuant to any of the
foregoing paragraphs, shall the Substitute Option be exercisable for more than
that proportion of the outstanding Substitute Common Stock equal to the
proportion of the outstanding Common Stock of Issuer which Grantee had the right
to acquire immediately prior to the issuance of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than the
proportion of the outstanding Substitute Common Stock referred to in the
immediately preceding paragraph but for this clause (e), the Substitute Option
Issuer shall make a cash payment to Grantee equal to the excess of (i) the value
of the Substitute Option without giving effect to the limitation in this clause
(e) over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by
a nationally recognized investment banking firm mutually selected by Grantee, on
the one hand, and Issuer, on the other hand.
SECTION 9. EXTENSION OF EXERCISE RIGHT. Notwithstanding Sections 2, 6 and
7 and 11 hereof, if Grantee has given the notice referred to in one or more of
such Sections, the exercise of the rights specified in any such Section shall be
extended (a) if the exercise of such rights requires obtaining
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regulatory approvals (including any required waiting periods) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights,
and (b) to the extent necessary to avoid liability under Section 16(b) of the
Exchange Act by reason of such exercise; PROVIDED, HOWEVER, that in no event
shall any closing date occur more than 6 months after the related Notice
Date, and, if the closing date shall not have occurred within such period due
to the failure to obtain any required approval by the Federal Reserve Board
or any other Governmental Authority despite the best efforts of Issuer or the
Substitute Option Issuer, as the case may be, to obtain such approvals, the
exercise of the Option shall be deemed to have been rescinded as of the
related Notice Date. In the event (a) Grantee receives official notice that
an approval of the Federal Reserve Board or any other Governmental Authority
required for the purchase and sale of the Option Shares shall not be issued
or granted, or (b) a closing date has not occurred within 6 months after the
related Notice Date due to the failure to obtain any such required approval,
Grantee shall be entitled to exercise the Option in connection with the
resale of the Option Shares pursuant to a registration statement as provided
in Section 6.
SECTION 10. ISSUER'S REPRESENTATIONS AND WARRANTIES. Issuer hereby
represents and warrants to Grantee as follows:
(A) CORPORATE AUTHORITY. Issuer 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
authorized by the Board of Directors of Issuer 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
executed and delivered by, and constitutes a valid and binding obligation of,
Issuer, enforceable against Issuer in accordance with its terms, except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought; and
(B) AVAILABILITY OF SHARES. Issuer has taken all necessary corporate
action to authorize and reserve and to permit it to issue, and at all times from
the date hereof through the termination of this Agreement in accordance with its
terms shall 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 hereunder, and all such shares,
upon issuance pursuant hereto, shall be duly authorized, validly issued, fully
paid, non-assessable, and shall be delivered free and clear of all claims,
liens, encumbrances and security interests and not subject to any preemptive
rights.
(C) NO VIOLATIONS. The execution, delivery and performance of this
Agreement does not or shall not, and the consummation by Issuer of any of the
transactions contemplated hereby shall not, constitute or result in (A) a breach
or violation of, or a default under, its articles of incorporation or by-laws,
or the comparable governing instruments of any of the Issuer Subsidiaries, or
(B) 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 the Issuer Subsidiaries (with or without the giving of notice, the lapse
of time or both) or under any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or non-governmental permit or license to
which it or any of the Issuer Subsidiaries is subject, that would, in any case
give any other person the ability to prevent or enjoin Issuer's performance
under this Agreement in any material respect.
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SECTION 11. ASSIGNMENT. Neither of the parties hereto may assign any of
its rights or delegate any of its obligations under this Agreement or the Option
created hereunder to any other Person without the express written consent of the
other party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event; PROVIDED, HOWEVER,
that until the date at which the Federal Reserve Board has approved an
application by Grantee under the B.H.C. Act to acquire the shares of Common
Stock subject to the Option, other than to a wholly owned subsidiary of Grantee,
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 (e.g., 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 the Federal Reserve Board. The
term "Grantee," as used in this Agreement, shall also be deemed to refer to
Grantee's permitted assigns. Any attempted assignment prohibited by this
Section 11 is void and without effect.
SECTION 12. FILINGS AND CONSENTS. Each of Grantee and Issuer shall use
its reasonable efforts to make all filings with, and to obtain consents of, all
third parties and Governmental Authorities necessary to the consummation of the
transactions contemplated by this Agreement, including, without limitation,
making application if necessary, for listing of the shares of Common Stock
issuable hereunder on any exchange or quotation system and applying to the
Federal Reserve Board under the B.H.C. Act and to state banking authorities for
approval to acquire the shares issuable hereunder.
SECTION 13. REMEDIES. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of the parties shall hereto be enforceable by either
party hereto through injunctive or other equitable relief. Both parties further
agree to waive any requirement for the securing or posting of any bond 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.
SECTION 14. 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 and covenants and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated.
SECTION 15. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in Person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Plan.
SECTION 16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement and shall be effective at the time
of execution.
SECTION 17. EXPENSES. Except as otherwise expressly provided herein, each
of the parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
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SECTION 18. ENTIRE AGREEMENT. Except as otherwise expressly provided
herein or in the Plan, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder 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 hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
except as assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
SECTION 19. DEFINITIONS. Capitalized terms used in this Agreement and not
defined herein but defined in the Plan shall have the meanings assigned thereto
in the Plan.
SECTION 20. EFFECT ON PLAN. Nothing contained in this Agreement shall be
deemed to authorize Issuer or Grantee to breach any provision of the Plan.
SECTION 21. SELECTIONS. In the event that any selection or determination
is to be made by Grantee hereunder and at the time of such selection or
determination there is more than one Grantee, such selection shall be made by a
majority in interest of such Grantees.
SECTION 22. FURTHER ASSURANCES. In the event of any exercise of the
option by Grantee, Issuer and such Grantee 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.
SECTION 23. VOTING. Except to the extent Grantee exercises the Option,
Grantee shall have no rights to vote or receive dividends or have any other
rights as a shareholder with respect to shares of Common Stock covered hereby.
SECTION 24. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana.
IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
PINNACLE FINANCIAL SERVICES, INC.
By __________________________________________
Xxxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
CNB BANCSHARES, INC.
By __________________________________________
Xxxxx X. Xxxxxxxx
Chief Executive Officer
