EXHIBIT 10
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Agreement"), dated as of December 27, 1999, is
between NATIONAL COMMERCE BANCORPORATION ("NCBC") and PIEDMONT BANCORP, INC.
("PBI").
RECITALS
PBI and NCBC have executed an Agreement and Plan of
Reorganization ("Merger Agreement"), of even date with this Agreement, under
which PBI will be merged with and into NCBC upon completion of the merger
("Merger") contemplated in the Merger Agreement.
By negotiating and executing the Merger Agreement and by
taking actions necessary or appropriate to effect the transactions contemplated
by the Merger Agreement, NCBC has incurred and will incur substantial direct and
indirect costs (including, without limitation, the costs of management and
employee time) and will forgo the pursuit of certain alternative investments and
transactions.
AGREEMENT
THEREFORE, in consideration of the promises set forth in this
Agreement and in the Merger Agreement, the parties agree as follows:
1. Grant of Option. Subject to the terms and conditions set
forth in this Agreement, PBI irrevocably grants an option ("Option") to NCBC to
purchase that number of authorized but unissued shares of PBI's common stock, no
par value per share ("PBI Common Stock"), such that immediately following such
purchase NCBC would own 19.5% of the then issued and outstanding shares (as
adjusted as set forth herein) of PBI Common Stock after giving effect to the
exercise of the Option at a per share price in cash (or immediately available
funds) equal to $7.65 ("Option Price").
2. Exercise of Option. Subject to the provisions of this
Section 2 and of Section 12(a) of this Agreement, this Option may be exercised
by NCBC as set forth in Section 5 of this Agreement, in whole or in part, at any
time, in any of the following circumstances:
(a) PBI enters into an agreement or PBI's Board of Directors
recommends to PBI shareholders (or withdraws its recommendation FOR approval of
the Merger after receipt of a proposal for PBI to enter into) an agreement
(other than the Merger Agreement) under --- which any entity, person or group
(collectively "Person"), within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), would: (1) merge
or consolidate with, acquire 25% or more of the assets or liabilities of, or
enter into any similar transaction with PBI, or (2) purchase or otherwise
acquire (including by merger, reorganization, consolidation, share exchange or
any similar transaction) securities representing 25% or more of PBI's voting
shares;
(b) any Person (other than NCBC or any of its subsidiaries)
acquires the beneficial ownership or the right to acquire beneficial ownership
of securities which, when aggregated with other such securities owned by such
Person, represents 25% or more of the voting shares of PBI (the term "beneficial
ownership" for purposes of this Agreement has the meaning set forth in Section
13(d) of the Exchange Act, and the regulations promulgated under the Exchange
Act) (not including acquisitions pursuant to which the acquiror or acquiring
group has successfully rebutted the presumption of control pursuant to 12 C.F.R.
ss.574(e) and has voted or given to management of PBI an irrevocable proxy to
vote the securities so acquired for the approval of the Merger at any and all
meetings of shareholders of PBI called for that purpose or at which such matter
is considered (a "Rebuttal Acquisition");
(c) failure of the shareholders to approve, prior to the
termination of the Merger Agreement, the Merger by the required affirmative vote
at a meeting of the shareholders, because a third Person (other than NCBC or a
subsidiary of NCBC) announces publicly or communicates, in writing, to PBI a
proposal to (a) acquire PBI (by merger, reorganization, consolidation, the
purchase of 25% or more of its assets or liabilities, or any other similar
transaction), or (b) purchase or otherwise acquire securities representing 25%
or more of the voting shares of PBI.
(d) It is understood and agreed that the Option will become
exercisable immediately upon the occurrence of any of the above-described
circumstances even though the circumstance occurred as a result, in part or in
whole, of the board of PBI complying with its fiduciary duties.
(e) Notwithstanding any other provision of this Agreement to
the contrary, in no event shall:
(i) NCBC's Total Profit (as defined below)
exceed $1,035,000 and, if it otherwise would exceed such
amount, NCBC at its sole election, shall either (A) reduce any
remaining shares of PBI Common Stock subject to the Option,
(B) deliver to PBI for cancellation without consideration
shares of PBI Common Stock previously purchased by NCBC
pursuant to the exercise of the Option, (C) pay cash to PBI,
or (D) any combination of the foregoing, so that NCBC's actual
realized Total Profit shall not exceed $1,035,000 after taking
into account the foregoing actions; or
(ii) the Option be exercised for a number of
shares of PBI Common Stock as would, as of the date of
exercise, result in NCBC's Total Notional Profit (as defined
below) exceeding $1,035,000; provided, that nothing in this
clause (ii) shall restrict any exercise of the Option
permitted hereby on any subsequent date.
As used in this Agreement, the term "Total Profit" shall mean
the aggregate sum (prior to the payment of taxes) of the following: (i) any net
cash amounts received by NCBC pursuant to the sale of shares of PBI Common Stock
received pursuant to the exercise of the Option ( or any other securities into
which such shares shall be converted or exchanged) to any unaffiliated person
less NCBC's purchase price of such shares; (ii) any amount received by NCBC
pursuant to PBI's repurchase of shares of PBI Common Stock received pursuant to
the exercise of the Option less NCBC's purchase price of such shares, and (iii)
any amount received by NCBC pursuant to PBI's repurchase of the Option (or any
portion thereof).
As used in this Agreement, the term "Total Notional Profit"
with respect to any number of shares of PBI Common Stock as to which NCBC may
propose to exercise the Option shall be the Total Profit determined as of the
date of such proposed exercise, assuming that the Option were exercised on such
date for such number of shares and assuming that such shares, together with all
other such shares held by NCBC or its affiliates as of such date that were
issued pursuant to the exercise of the Option, were sold for cash at the closing
sale price per share of PBI Common Stock as quoted on the American Stock
Exchange ("AMEX") or, if PBI Common Stock in not then quoted on AMEX, 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 NCBC as of the close of business on the preceding trading day
(less customary brokerage commissions).
3. Notice, Time and Place of Exercise. When NCBC wishes to
exercise the Option, NCBC will give written notice of its intention to exercise
the Option and the place and date for the closing of the exercise (which date
may not be later than ten business days from the date such notice is mailed). If
any law, regulation or other restriction will not permit such exercise to be
consummated during this ten-day period, the date for the closing of such
exercise will be within five days following the cessation of the restriction on
consummation.
4. Payment and Delivery of Certificate(s). At the closing for
the exercise of the Option or any portion thereof, (a) NCBC and PBI will each
deliver to the other certificates as to the accuracy, as of the closing date, of
their respective representations and warranties under this Agreement, (b) NCBC
will pay the aggregate purchase price for the shares of PBI Common Stock to be
purchased by delivery of a certified or bank cashier's check in immediately
available funds payable to the order of PBI, and (c) PBI will deliver to NCBC a
certificate or certificates representing the shares so purchased.
5. Transferability of the Option. Neither the Option nor any
portion of the Option will be transferable except to a wholly-owned subsidiary
of NCBC.
6. Representations, Warranties and Covenants of PBI. PBI
represents and warrants to NCBC as follows:
(a) Due Authorization. This Agreement has been duly authorized
by all necessary corporate action on the part of PBI, has been duly executed by
a duly authorized officer of PBI and constitutes a valid and binding obligation
of PBI. No shareholder approval by PBI shareholders is required by applicable
law or otherwise before the exercise of the Option in whole or in part.
(b) Option Shares. PBI has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue and, at all
times from the date of this Agreement to such time as the obligation to deliver
shares under this Agreement terminates, will have reserved for issuance, at the
closing(s) upon exercise of the Option, the Option Shares (subject to
adjustment, as provided in Section 8 below), all of which, upon issuance under
this Agreement, will be duly and validly issued, fully paid and nonassessable,
and will be delivered free and clear of all claims, liens, encumbrances and
security interests, including any preemptive right of any of the shareholders of
PBI.
(c) No Conflicts. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated by it will
violate or result in any violation of or be in conflict with or constitute a
default under any term of the charter or bylaws of PBI or any agreement,
instrument, judgment, decree, law, rule or order applicable to PBI or any
subsidiary of PBI or to which PBI or any such subsidiary is a party.
(d) Notification of Record Date. At any time from and after
the date of this Agreement until the Option is no longer exercisable, PBI will
give NCBC at least 10 days prior written notice before setting the record date
for determining the holders of record of the PBI Common Stock entitled to vote
on any transaction described in Section 2 above.
7. Representations, Warranties and Covenants of NCBC. NCBC
represents and warrants to PBI as follows:
(a) Due Authorization. This Agreement has been duly authorized
by all necessary corporate action on the part of NCBC, has been duly executed by
a duly authorized officer of NCBC and constitutes a valid and binding obligation
of NCBC.
(b) No Conflicts. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated by it will
violate or result in any violation of or be in conflict with or constitute a
default under any term of the charter or bylaws of NCBC or any agreement,
instrument, judgment, decree, law, rule or order applicable to NCBC or any
subsidiary of NCBC or to which NCBC or any such subsidiary is a party.
8. Adjustment Upon Changes in Capitalization. In the event of
any change in the PBI Common Stock by reason of stock dividends, split-ups,
mergers, reorganizations, recapitalizations, combinations, exchanges of shares
or the like, the number and kind of shares or securities subject to the Option
and the purchase price per share of Common Stock will be appropriately adjusted.
If, before the Option terminates or is exercised, PBI is acquired by another
party, or consolidates with or merges into another corporation, NCBC will
thereafter receive, upon exercise of the Option, the securities or properties to
which a holder of the number of shares of Common Stock then deliverable upon the
exercise thereof would have been entitled upon such acquisition, consolidation,
merger, or reorganization, and PBI will take all steps in connection with such
acquisition, consolidation, merger, or reorganization, as may be necessary to
assure that the provisions of this Agreement will thereafter be applicable, as
nearly as reasonably may be practicable, in relation to any securities or
property thereafter deliverable upon exercise of the Option.
9. Binding Effect; Assignment. This Agreement binds and inures
to the benefit of the parties and their successors. Except as set forth in
Section 5, this Agreement is not assignable by either party.
10. Regulatory Restrictions. Upon exercise of this Option, PBI
will use its best efforts to obtain or to cooperate with NCBC in obtaining all
necessary regulatory consents, approvals, waivers or other action (whether
regulatory, corporate or other) to permit the acquisition of any or all Option
Shares by NCBC.
11. No Rights as Shareholder. This Option, before it is
exercised, will not entitle its holder to any rights as a shareholder of PBI at
law or in equity. Specifically, this Option, before it is exercised, will not
entitle the holder to vote on any matter presented to the shareholders of PBI
or, except as provided in this Agreement, to any notice of any meetings of
shareholders or any other proceedings of PBI.
12. Miscellaneous.
(a) Termination. This Agreement and the Option will terminate
upon the earliest of (1) the mutual agreement of the parties to this Agreement;
(2) the 90th day following the termination of the Merger Agreement for any
reason; or (3) 12 months after the date hereof; but if the Option has been
exercised before the termination of this Agreement, then the exercise will close
under Section 4 of this Agreement, even though that closing date is after the
termination of this Agreement.
(b) Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties.
(c) Severability of Terms. Any provision of this Agreement
that is invalid, illegal or unenforceable is ineffective only to the extent of
the invalidity, illegality or unenforceability without affecting in any way the
remaining provisions or rendering any other provisions of this Agreement
invalid, illegal or unenforceable. Without limiting the generality of the
foregoing, if the right of NCBC to exercise the Option in full for the total
number of shares of PBI Common Stock or other securities or property issuable
upon the exercise of the Option is limited by applicable law, or otherwise, NCBC
may, nevertheless, exercise the Option to the fullest extent permissible.
(d) Notices. All notices, requests, claims, demands and other
communications under this Agreement must be in writing and must be given (and
will be deemed to have been duly received if so given) by delivery, by cable,
telecopies or telex, or by registered or certified mail, postage prepaid, return
receipt requested, to the respective parties at the addresses below, or to such
other address as either party may furnish to the other in writing. Change of
address notices will be effective upon receipt.
f to PBI to: Piedmont Bancorp, Inc.
000 Xx. Xxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attn: D. Xxxxx Xxxxxxx, President
Fax: (000) 000-0000
Phone: (000) 000-0000
ith a copy to: Brooks, Pierce, XxXxxxxx, Xxxxxxxx &
Xxxxxxx, L.L.P.
0000 Xxxxxxxxxxx Xxxxx
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, III, Esq.
Fax: (000) 000-0000
Phone: (000) 000-0000
f to NCBC to: National Commerce Bancorporation
Xxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
Phone: (000) 000-0000
and
Xxxxxxx X. Xxxxx
Vice President and General Counsel
Fax: (000) 000-0000
Phone: (000) 000-0000
with a copy to:Bass, Xxxxx & Xxxx PLC
000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxx X. Good, Esq.
Fax: (000) 000-0000
Phone: (000) 000-0000
(e) Governing Law. The parties intend this Agreement and the
Option, in all respects, including all matters of construction, validity and
performance, to be governed by the laws of the State of North Carolina, without
giving effect to conflicts of law principles.
(f) Counterparts. This Agreement may be executed in several
counterparts, including facsimile counterparts, each of which is an original,
and all of which together constitute one and the same agreement.
(g) Effects of Headings. The section headings in this
Agreement are for convenience only and do not affect the meaning of its
provisions.
IN WITNESS WHEREOF, the parties hereto have signed and
delivered this Stock Option Agreement as of the day and year first above
written.
NATIONAL COMMERCE BANCORPORATION
By: /s/ Xxxxxxx X. Xxxx, Xx.
-------------------------
Xxxxxxx X. Xxxx, Xx.
Vice Chairman
PIEDMONT BANCORP, INC.
By: /s/ X. Xxxxx Xxxxxxx
X. Xxxxx Xxxxxxx
President and Chief Executive Officer
