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
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 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 set forth 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.
(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.
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.
(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 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 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 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
(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 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 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 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. DCB shall
be entitled to one demand registration pursuant to this Section 10(a).
(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;
(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.
(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 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 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 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 Option 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 pursuant 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 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 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.
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 & C.E.O.
DIME COMMUNITY BANCSHARES, INC.
By: /s/ Xxxxxxx X. Palagaino
-----------------------------
Name: Xxxxxxx X. Palagaino
Title: Chairman & C.E.O.
