STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated June 1, 1998, between State
Financial Services Corporation, a Wisconsin corporation ("Grantee"), and
Home Bancorp of Elgin, Inc., a Delaware corporation ("Issuer").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger (the "Merger Agreement");
WHEREAS, as a condition and an inducement to Grantee's entering
into the Merger Agreement, Issuer is granting Grantee the Option (as
hereinafter defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant
of the Option and the Merger Agreement:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms
hereof, up to an aggregate of 1,371,159 (as adjusted or set forth in
Sections 1(b) and 5(b) hereof) fully paid and nonassessable shares of the
common stock, par value $0.01 per share, of Issuer ("Issuer Common Stock")
at a price per share of $17.00 (the "Option Price"); provided, however,
that in the event Issuer issues or agrees to issue any shares of Issuer
Common Stock (other than shares of Issuer Common Stock issued pursuant to
stock options granted pursuant to any director or employee benefit or
stock option plan prior to the date hereof) at a price less than $17.00
(as adjusted pursuant to subsection (b) of Section 5 hereof), the Option
Price shall be equal to such lesser price; provided, further, that in no
event shall the number of shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Issuer Common Stock.
The number of shares of Issuer Common Stock that may be received upon the
exercise of the Option at Option Price are subject to adjustment as herein
set forth.
(b) In the event that any additional shares of Issuer Common Stock
are issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement and other than pursuant
to an event described in Section 5(a) hereof), the number of shares of
Issuer Common Stock subject to the Option shall be increased so that,
after such issuance, such number together with any shares of Issuer Common
Stock previously issued pursuant hereto, equals 19.9% of the number of
shares of Issuer Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be
deemed to authorize Issuer to issue shares of Issuer Common Stock in
breach of any provision of the Merger Agreement.
2. (a) Grantee may exercise the Option, in whole or part if, but
only if, both an Initial Triggering Event (as hereinafter defined) and a
Subsequent Triggering Event (as hereinafter defined) shall have occurred
prior to the occurrence of an Exercise Termination Event (as hereinafter
defined); provided, however, that Grantee shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2)
within three (3) months following such Subsequent Triggering Event (or
such later period as provided in Section 10 hereof). Each of the following
shall be an Exercise Termination Event: (i) the Effective Time of the
Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of
an Initial Triggering Event except a termination by Grantee pursuant to
Section 8.l(f) of the Merger Agreement, or by Grantee or Issuer pursuant
to Section 8.1(d) of the Merger Agreement if prior to or within three
months after, the duly held meeting of the shareholders of the Issuer at
which the required vote to approve the Merger was not obtained it shall
have been publicly announced or disclosed that any person (other than
Grantee or any Grantee Subsidiary (as defined below)) shall have made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction (as defined below) (each, a "Listed Termination"); or (iii)
the passage of twelve (12) months (or such longer period as provided in
Section 10) after termination of the Merger Agreement if such termination
follows the occurrence of an Initial Triggering Event or is a Listed
Termination. Notwithstanding anything to the contrary contained herein,
(i) the Option may not be exercised at any time when Grantee shall be in
material breach of any of its representations, warranties, covenants or
agreements contained in this Agreement or in the Merger Agreement such
that, in the case of the Merger Agreement, Issuer shall be entitled to
terminate the Merger Agreement pursuant to Section 8.l(e)(i) and (ii)
thereof and (ii) this Agreement shall automatically terminate upon the
proper termination of the Merger Agreement by Issuer either pursuant to
Section 8.l(e) thereof as a result of the material breach by Grantee of
its covenants or agreements contained in the Merger Agreement or pursuant
to Section 8.l(g) thereof. Notwithstanding the occurrence of an exercise
Termination Event, Grantee shall be entitled to purchase those shares of
Issuer Common stock with respect to which it has exercised the Option in
accordance with the terms hereof prior to the Exercise Termination event.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(i) Issuer or any subsidiary of Issuer (an "Issuer
Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as hereinafter
defined) 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 "1934 Act"), and the rules and
regulations thereunder) other than Grantee or any of the
subsidiaries of Grantee (each a "Grantee Subsidiary") or
the Board of Directors of Issuer (the "Issuer Board") shall
have recommended that the shareholders of Issuer approve or
accept any Acquisition Transaction other than the Merger
(as defined in the Merger Agreement). For purposes of this
Agreement, "Acquisition Transaction" shall mean either (x)
a merger or consolidation, or any similar transaction,
involving Issuer or Home Federal Savings and Loan
Association of Elgin (other than internal mergers,
consolidations or similar transactions involving solely
Issuer and/or one or more existing wholly-owned Issuer
Subsidiaries, provided, that any such transaction is not
entered into in violation of the terms of the Merger
Agreement), (y) a purchase, lease or other disposition of
15% or more of the consolidated assets, net revenues or net
income of Issuer (on a consolidated basis), or (z) an
issuance, sale or other disposition (including by way of
merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of
Issuer or Home Federal Savings and Loan Association of
Elgin (notwithstanding the foregoing, the beneficial
ownership by any current stockholders of Issuer of greater
than 10% of voting stock of Issuer as of the date of this
Agreement shall not constitute an Initial Triggering
Event);
(ii) Any person (other than Grantee or any Grantee Subsidiary)
shall have acquired beneficial ownership (as such term is
defined in Rule I 3d-3 under the 0000 Xxx) or the right to
acquire beneficial ownership of, or any "group" (as such
term is defined under the 0000 Xxx) shall have been formed
which beneficially owns or has the right to acquire
beneficial ownership of, 20% or more of the then
outstanding shares of Issuer Common Stock (other than
shares held in accounts related to Issuer's employee
benefit plans);
(iii) The shareholders of Issuer shall have voted and failed to
approve the Merger Agreement and the Merger at a meeting
which has been held for that purpose, or such meeting, in
violation of the Merger Agreement, shall not have been
held, or such meeting shall have been cancelled prior to
termination of the Merger Agreement if, in any event, prior
to such meeting (or if such meeting shall not have been
held or shall have been cancelled, prior to the termination
of the Merger Agreement), it shall have been publicly
announced or disclosed that any person (other than Grantee
or any Grantee Subsidiary) shall have made, or disclosed an
intention to make, a proposal to engage in an Acquisition
Transaction;
(iv) The Board of Directors of the Issuer shall have withdrawn
or modified (or publicly announced its intention to
withdraw or modify), in any manner adverse in any respect
to Grantee, its recommendation that the shareholders of
Issuer approve the transactions contemplated by the Merger
Agreement, or Issuer or any 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 with any
person other than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary
shall have made a proposal to Issuer or its shareholders to
engage in an Acquisition Transaction and such proposal
shall have been publicly announced;
(vi) Any person other than Grantee or any Grantee Subsidiary
shall have commenced (as such term is defined in Rule 17d-2
under the 1934 Act), or shall have filed with the SEC a
registration statement under the 1934 Act or tender offer
materials with respect to, a potential exchange offer or
tender offer to purchase any shares of Issuer Common Stock
such that, upon consummation of such offer, such person or
a "group" (as such term is defined under the 0000 Xxx) of
which such person is a member, would acquire beneficial
ownership (as such term is defined in Rule 13d-3 of the
1934 Act), or the right to acquire beneficial ownership, of
20% or more of the then outstanding shares of Issuer Common
Stock:
(v) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in
anticipation of and in order to facilitate engaging in an
Acquisition Transaction, and following such breach Grantee
would be entitle to terminate the Merger Agreement (whether
immediately or after the giving of notice or passage of
time or both); or
(vi) Any person other than Grantee or any Grantee Subsidiary
shall have filed an application or notice with the Board of
Governors of the Federal Reserve System (the "Federal
Reserve Board"), the Office of Thrift Supervision ("OTS"),
or other federal or state bank regulatory or antitrust
authority, which application or notice has been accepted
for processing. for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 30% or more
of the then outstanding shares of Issuer Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that
the percentage referred to in clause (z) of the second
sentence thereof shall be 30%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event") to the extent that such Triggering Event
is known to the Issuer, it being understood that the giving of such notice
by Issuer shall not be a condition to the right of Grantee to exercise the
Option.
(e) In the event Grantee is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice
(the date of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it will purchase pursuant to
such exercise and (ii) a place and date not earlier than three business
days nor later than 30 business days from the Notice Date for the closing
of such purchase (the "Closing Date"); provided, that if the closing of
the purchase and sale pursuant to the Option cannot be consummated by
reason of any applicable judgment, decree, order, law or regulation, the
period of time that otherwise would run pursuant to this sentence shall
run instead from the date on which such restriction or consummation has
expired or been terminated; and, provided, further, without limiting the
foregoing, that if prior notification to or approval of the Federal
Reserve Board, OTS or any other regulatory or antitrust authority is
required in connection with such purchase, Grantee shall promptly file the
required notice or application for approval, shall promptly notify Issuer
of such filing (and the Issuer shall fully cooperate with Grantee in the
filing of any notice or application and the obtaining of any such
approval), and shall expeditiously process the same. and the period of
time that otherwise would run pursuant to this sentence shall run instead
from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained, and in either event,
any requisite waiting period or periods shall have passed. Any exercise of
the Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
Grantee shall (i) pay to Issuer the aggregate purchase price for the
shares of Issuer Common Stock purchased pursuant to the exercise of the
Option in immediately available funds by wire transfer to a bank account
designated by Issuer and (ii) present and surrender this Agreement to
Issuer at its principal executive offices; provided, however, that the
failure or refusal of the Issuer to designate such a bank account or
accept surrender of this Agreement shall not preclude Grantee from
exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer
shall deliver to Grantee a certificate or certificates representing the
number of shares of Issuer Common Stock purchased by Grantee 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
purchasable hereunder.
(h) Certificates for lssuer Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. AS AMENDED, OR ANY STATE
SECURITIES LAWS OR BLUE SKY LAWS, AND MAY BE REOFFERED OR SOLD ONLY
IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT
DATED JUNE 1, 1998, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER
UPON REQUEST."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 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 SEC. or an opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the
effect that such legend is not required for purposes of the 1993 Act; (ii)
the reference to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in compliance with
the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the opinion of counsel to
Grantee, which opinion shall be reasonably satisfactory to Issuer; 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) Upon the giving by Grantee to Issuer of the written notice
of exercise of the Option provided for under subsection (e) of this
Section 2 and the tender of the applicable purchase price in immediately
available funds, the Issuer shall deliver to Grantee a certificate or
certificates in definitive form representing the shares of Issuer Common
Stock issued upon such exercise, which shares shall be free and clear of
all liens, claims, charges and encumbrances of any kind whatsoever, and
Grantee shall be deemed to be the holder of record of such shares,
notwithstanding that the stock transfer books of Issuer shall then be
closed. Issuer shall pay its out-of-pocket expenses payable in connection
with the preparation, issue and delivery of stock certificates under this
Section 2 in the name of Grantee or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free
from preemptive tights, sufficient authorized but unissued or treasury
shares of Issuer Common Stock so that the Option may be exercised without
additional authorization of Issuer Common Stock after giving effect to all
other options, warrants, convertible securities and other rights to
purchase Issuer 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 Issuer; (iii) promptly
to take all action as may from time to time be required (including (x)
complying with all applicable premerger notification, reporting and
waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under any state
or federal banking law, prior approval of or notice to the Federal Reserve
Board, OTS or to any state or other federal regulatory authority is
necessary before the Option may be exercised, cooperating fully with
Grantee in preparing such applications or notices and providing such
information to the Federal Reserve Board, OTS or such state or other
federal regulatory authority as they may require) in order to permit
Grantee to exercise the Option and Issuer duly and effectively to issue
shares of Issuer Common Stock pursuant hereto; and (iv) promptly to take
all action provided herein to protect the rights of Grantee against
dilution.
4. 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 Grantee to
purchase, on the same terms and subject to the same conditions as are set
forth therein, in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used
herein 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 will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the Agreement
so lost, stolen, destroyed mutilated shall at any time be enforceable by
anyone.
5. In addition to the adjustment in the number of shares of Issuer
Common Stock that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of shares of Issuer Common stock
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as provided in this Section 5.
(a) In the event of any change in, or distributions (other than the
payment of cash dividends in the ordinary course consistent with past
practice) in respect of, the Issuer 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 Issuer 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 Issuer Common Stock are
to be issued or otherwise become outstanding as a result of any such
change (other than pursuant to an exercise of the Option), the number of
shares of Issuer Common Stock that remain subject to the Option shall be
increased so that, after such issuance and together with shares of Issuer
Common Stock previously issued pursuant to the exercise of the Option (as
adjusted on account of any of the foregoing changes in the Issuer Common
Stock), it equals 19.9% of the number of shares of Issuer Common Stock
then issued and outstanding.
(b) Whenever the number of shares of Issuer 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 Issuer Common
Stock purchasable prior to the adjustment and the denominator of which
shall be equal to the number of shares of Issuer Common Stock purchasable
after the adjustment.
6. (a) Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event Grantee may, within twelve
(12) months (or such later period as provided in Section 10) of such
Subsequent Triggering Event, by written notice (the "Registration Notice")
to Issuer request Issuer to register under the 1933 Act all or any part of
the shares of capital stock of Issuer acquired by Grantee pursuant to this
Agreement beneficially owned by Grantee (the "Registrable Securities").
(b) Issuer shall thereupon have the option exercisable by written
notice delivered to Grantee within three (3) business days after the
receipt of the Registration Notice, irrevocably to agree to purchase all
or any part of the Registrable Securities proposed to be so sold for cash
at a price equal to the product of (i) the number of Registrable
Securities to be so purchased by the Issuer and (ii) the Fair Market Value
(as defined below) of a share of such Registrable Securities. As used
herein, the "Fair Market Value" of any share of Registrable Securities
shall be the average of the daily closing sales price for a share of
Issuer Common Stock on the Nasdaq National Market during the five (5)
trading days prior to the date on which the Registration Notice for such
share is received by Issuer.
(c) Any purchase of Registrable Securities by Issuer under Section
6(b) shall take place at a closing to be held at the principal executive
offices of Issuer or at the offices of its counsel at any reasonable date
and time designated by Issuer in such notice with ten (10) business days
after delivery of such notice, and payment of the purchase price for the
shares to be so purchase shall be made by delivery at the time of such
closing in immediately available funds.
(d) If Issuer does not elect to exercise its option pursuant to this
Section 6 with respect to all Registrable Securities, it shall use its
best efforts to effect, as promptly as practicable, and keep current the
registration under the 1933 Act of the unpurchased Registrable Securities
proposed to be sold. Issuer will use its reasonable best efforts to cause
such registration statement promptly to become effective and then to
remain effective for such period not in excess of 120 days from the day
such registration statement first becomes effective or such shorter time
as may be reasonably necessary to effect the sale or other disposition of
the Registrable Securities; provided, however, that
(i) Grantee shall not be entitled to demand more than one (1)
effective registration statements hereunder, and
(ii) Issuer will not be required to file any such registration
statement during any period of time (not to exceed 90 days
after such request in the case of clauses (A) and (B) below
or 120 days in the case of clause (C) below) when
(A) Issuer is in possession of material non-public
information which it reasonably believes would be
detrimental to be disclosed at such time and, in the
opinion of counsel to Issuer, such information would
be required to be disclosed if a registration
statement were filed at that time;
(B) Issuer is required under the 1933 Act to include
audited financial statements for any period in such
registration statement and such financial statements
are not yet available for inclusion in such
registration statement; or
(C) Issuer determines, in its reasonable judgment, that
such registration would interfere with any financing,
acquisition or other material transaction involving
Issuer or any of its affiliates.
(e) Issuer shall use its reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 6 to be
qualified for sale under the securities or "blue sky" laws of such
jurisdictions as Grantee may reasonably request and shall continue such
registration or qualification in effect in such jurisdiction; provided,
however, that Issuer shall not be required to qualify to do business in,
or consent to general service of process in, any jurisdiction by reason of
this provision.
(f) The registration rights set forth in this Section 6 are subject
to the condition that Grantee shall provide Issuer with such information
with respect to the Registrable securities, the plans for the distribution
thereof, and such other information with respect to such holder as, in the
reasonable judgment of counsel for Issuer, is necessary to enable Issuer
to include in such registration statement all material facts required to
be disclosed with respect to a registration thereunder.
(g) A registration effected under this Section 6 shall be effected
at Issuer's expense, except for underwriting discounts and commissions,
broker's fees and the fees and the expenses of counsel and other advisors
to Grantee.
(h) In connection with any registration effected under this Section
6, the parties agree
(i) to indemnify each other in the customary manner, and
(ii) to take all reasonable further actions which shall be
reasonably necessary to effect such registration and sale.
(i) If Issuer Common Stock or any other securities to be acquired
upon exercise of the Option are then listed on the Nasdaq National Market
or a national securities exchange, Issuer, upon the request of Grantee,
will promptly file an application to list the shares of Issuer Common
Stock or other securities to be acquired upon exercise of the Option on
the Nasdaq National Market or a national securities exchange, as the case
may be, and will its best efforts to obtain approval of such listing as
soon as practicable.
7. (a) At any time after the occurrence of a Repurchase Event (as
defined below), (i) at the request of Grantee, delivered prior to an
Exercise Termination Event (or such later period as provided in Section
10), Issuer (or any successor thereto) 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 this Option may then
be exercised and (ii) at the request of Grantee delivered prior to an
Exercise Termination Event (or such later period as provided in Section
10), Issuer (or any successor thereto) shall repurchase such number of the
Option Shares from Grantee as Grantee 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
Issuer Common Stock at which a tender or exchange offer therefor has been
made, (ii) the price per share of Issuer Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (iii) the highest
closing price for shares of Issuer Common Stock within the six-month
period immediately preceding the date Grantee gives notice of the required
repurchase of this Option or Grantee gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a
sale of all or any substantial part of Issuer's assets or deposits, the
sum of the net price paid in such sale for such assets or deposits and the
current market value of the remaining net assets of Issuer as determined
by a nationally recognized investment banking firm selected by Grantee and
reasonably acceptable to Issuer, divided by the number of shares of Issuer
Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than
cash shall be determined by a nationally recognized investment banking
firm selected by Grantee and reasonably acceptable to Issuer.
(b) Grantee may exercise its right to require Issuer to repurchase
the Option and any Option Shares pursuant to this Section 7 by
surrendering for such purpose to Issuer, at its principal office, a copy
of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that Grantee elects to
require Issuer to repurchase this Option and/or the Option Shares in
accordance with the provisions of this Section 7. As promptly as
practicable, and in any event within five business days after the
surrender of the Option and/or certificates representing Option Shares and
the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to Grantee the Option Repurchase Price
and/or to Grantee the Option Share Repurchase Price therefor or the
portion thereof that Issuer is not then prohibited under applicable law
and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify Grantee and thereafter deliver or cause to be
delivered, from time to time, to Grantee 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 paragraph (b) of this Section 7 is prohibited under
applicable law or regulation, or as a consequence of administrative
policy, from delivering to Grantee the Option Repurchase Price and the
Option Share Repurchase Price in full (and Issuer hereby undertakes to use
its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in
order to accomplish such repurchase), Grantee may revoke its notice of
repurchase of the Option and/or the Option Shares whether in whole or to
the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to Grantee that portion of the Option Repurchase
Price and/or the Option Shares Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver to Grantee either (A) a new
Agreement evidencing the right of Grantee to purchase that number of
shares of Issuer Common Stock obtained by multiplying the number of shares
of Issuer Common Stock for which the surrendered Agreement was exercisable
at the time of delivery of the notice of repurchase by a fraction, the
numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to Grantee and the denominator of which is the
Option Repurchase Price, and/or (B) a certificate for the Option Shares it
is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in
the first sentence of this subsection (c), or shall be scheduled to occur
at any time before the expiration of a period ending on the thirtieth day
after such date. Grantee shall nonetheless have the right to exercise the
Option until the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be
deemed to have occurred upon the occurrence of any of the following events
or transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 50% or more
of the then outstanding Issuer Common Stock; or
(ii) the consummation of any Acquisition Transaction described
in Section 2(b)(i) hereof, except that the percentage
referred to in clause (z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into
any person. ("other than Grantee or a Grantee Subsidiary), or engage in a
plan of exchange with any person (other than Grantee or a Grantee
Subsidiary) and Issuer shall not be the continuing or surviving
corporation of such consolidation or merger or the acquirer in such plan
of exchange, (ii) to permit any person, other than Grantee or a Grantee
Subsidiary, to merge into Issuer or be acquired by Issuer in a plan of
exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the
then outstanding shares of Issuer 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 Issuer Common Stock shall
after such merger or plan or exchange represent less than 50% of the
outstanding shares and share equivalents of the merged or acquiring
company, or (iii) to sell or otherwise transfer all or a substantial part
of its or an Issuer Subsidiary's assets or deposits 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 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 Grantee, of
either (x) the Acquiring Corporation (as hereinafter defined) or (y) any
person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer
(if other than Issuer), (ii) the acquiring person in a plan
of exchange in which Issuer is acquired, (iii) the Issuer
in a merger or plan of exchange in which Issuer is the
continuing or surviving or acquiring person. and (iv) the
transferee of all or a substantial part of Issuer's assets
or deposits (or the assets or deposits of the Issuer
Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise
of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for one year
immediately preceding the consolidation, merger or sale
referred to in Section 8(a), but in no event higher than
the closing price of the shares of Substitute Common Stock
on the day preceding such consolidation, merger or sale;
provided, that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to
a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by
such person. as Grantee may elect.
(v) "Person" as used in this Agreement shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange
Act.
(c) The Substitute Option shall have the same terms as the Option:
provided, that the exercise price therefor and number of shares subject
thereto shall be as set forth in this Section 8; provided, further, that
the Substitute Option shall be exercisable immediately upon issuance
without the occurrence of a Triggering Event; and provided, further, 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. The issuer of the Substitute Option
shall also enter into an agreement with Grantee in substantially the same
form as this Agreement (subject to the variations described in the
foregoing provisos), which agreement shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Issuer Common Stock for which the
Option was exercisable immediately prior to the event described in the
first sentence of Section 8(a), divided by the Average Price, rounded up
to the nearest whole share. The exercise price of the Substitute Option
per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number
of shares of Issuer Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section
8(a) and the denominator of which shall be the number of shares of
Substitute Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for
more than 19.9% of the shares of Substitute Common Stock outstanding prior
to exercise but for this Section 8(e), the issuer of the Substitute Option
(the "Substitute Option Issuer") shall make a cash payment to Grantee
equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this Section 8(e) over (ii) the value
of the Substitute Option after giving effect to the limitation in this
Section 8(e). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder and take all other actions that may be
necessary so that the provisions of this Section 8 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 of exercise of the Substitute Option and the shares
of Substitute Common Stock are otherwise in no way distinguishable from or
have lesser economic value than other share of common stock issued by
Substitute Option Issuer (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 under the 1934 Act or any successor
provision)).
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise
price of the Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then be
exercised, and at the request of the owner (the "Substitute Share Owner")
of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to the Highest Closing
Price multiplied by the number of Substitute Shares so designated. The
term "Highest Closing Price" shall mean the highest closing price for
shares of Substitute Common Stock within the six-month period immediately
preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner
gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute
Shares pursuant to this Section 9 by surrendering for such purpose to the
Substitute Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a copy of this
Agreement) and/or certificates for Substitute Shares accompanied by a
written notice or notices stating that the Substitute Option Holder or the
Substitute Share Owner, as the case may be, elects to require the
Substitute Option Issuer to repurchase the Substitute Option and/or the
Substitute Shares in accordance with the provisions of this Section 9. As
promptly as practicable and in any event within five business days after
the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating
thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase
Price and/or to the Substitute Share Owner the Substitute Share Repurchase
Price therefor or the portion thereof which the Substitute Option Issuer
is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from repurchasing the Substitute Option and/or the Substitute
Shares in part or in full, the Substitute Option Issuer shall immediately
so notify the Substitute Option Holder and/or the Substitute Share Owner
and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Option Repurchase Price and/or
the Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five (5) business days after the date
on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time
after delivery of a notice of repurchase pursuant to subsection (b) of
this Section 9 prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the Substitute
Option Holder and/or the Substitute Share Owner, as appropriate, the
Substitute Option Repurchase Price and the Substitute Share Repurchase
Price, respectively, in full (and the Substitute Option Issuer shall use
its reasonable best efforts to receive all required regulatory and legal
approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder and/or Substitute Share Owner
may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition.
whereupon, in the latter case, the Substitute Option Issuer shall promptly
(i) deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A)
to the Substitute Option Holder, a new Substitute Option evidencing the
right of the Substitute Option Holder to purchase that number of shares of
the Substitute Common Stock obtained by multiplying the number of shares
of the Substitute Common Stock for which the surrendered Substitute Option
was exercisable at the time of delivery of the notice of repurchase by a
fraction, the numerator of which is the Substitute Option Repurchase Price
less the portion thereof theretofore delivered to the Substitute Option
Holder and the denominator of which is the Substitute Option Repurchase
Price, and/or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the
notice by the Substitute Option Issuer described in the first sentence of
this subsection (c), or shall be scheduled to occur at any time before the
expiration of a period ending on the thirtieth day after such date, the
Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day period.
10. The 30-day, 3-month, 6-month, or 12-month periods for exercise
of certain rights under Sections 2, 6, 7 and 9 shall be extended: (i) to
the extent necessary to obtain all regulatory approvals for the exercise
of such rights (for so long as Grantee. Substitute Option Holder or
Substitute Share owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the
expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the 1934 Act by reason
of such exercise.
11. (a) Issuer hereby represents and warrants to Grantee as
follows:
(i) 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 and validly
authorized by the Issuer Board prior to the date hereof and
no other corporate proceedings on the part of the Issuer
are necessary to authorize this Agreement or to consummate
the transactions so contemplated. This Agreement has been
duly and validly executed and delivered by Issuer.
(ii) 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 will have reserved
for issuance upon the exercise of the Option, that number
of shares of Issuer Common Stock equal to the maximum
number of shares of Issuer Common Stock at any time and
from time to time issuable hereunder, and all such shares,
upon issuance pursuant thereto, will be duly authorized,
validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance
and security interests and not subject to any preemptive
rights.
(b) Grantee hereby represents and warrants to Issuer as follows:
(i) Grantee has corporate power and authority to execute and
deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by
Grantee and the performance of its obligations hereunder by
Grantee have been duly and validly authorized by the Board
of Directors of Grantee and no other corporate proceedings
on the part of grantee are necessary to authorize this
Agreement or for Grantee to perform its obligations
hereunder. This Agreement has been duly and validly
executed and delivered by Grantee.
(ii) Any Option Shares acquired upon exercise of this Option by
Grantee will be acquired for Grantee's own account and for
investment purposes only. This Option is not being, and any
Option Shares or other securities acquired by Grantee 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 1933 Act.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any
other person, without the express written consent of the other party.
Certificates representing shares sold in a registered public offering
pursuant to Section 9 shall not be required to bear the legend set forth
in Section 2(h).
13. Each of Grantee and Issuer will use its reasonable best 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, applying to
the Federal Reserve Board and OTS for approval to acquire the shares
issuable hereunder, but Grantee shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Issuer Common
Stock issuable hereunder until such time, if ever, as it deems appropriate
to do so.
14. 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 hereto shall be enforceable by
either party hereto through injunctive or other equitable relief, this
being in addition to any other remedy to which they are entitled at law or
in equity. In connection therewith both parties waive the posing of any
bond or similar requirement.
15. 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. If for any reason
such court or regulatory agency determines that Grantee is not permitted
to acquire, or Issuer is not permitted to repurchase pursuant to Section
7, the full number of shares of Issuer Common Stock provided in Section
1(a) hereof (as adjusted pursuant to Section 1(b) or Section 5 hereof), it
is the express intention of Issuer to allow Grantee to acquire or to
require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in
person, by fax, telecopy, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the
parties set forth in the Merger Agreement.
17. This Agreement shall be governed by and construed in accordance
with the laws of the State of Wisconsin, without regard to the conflict of
law principles thereof.
18. 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.
19. 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.
20. Except as otherwise expressly provided herein or in the Merger
Agreement, 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 assignees. 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 assignees, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.
21. Each party shall execute and deliver such other documents and
instruments and take such further action that may be necessary in order to
consummate the transactions contemplated hereby.
22. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all
as of the date first above written.
HOME BANCORP OF ELGIN, INC.
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
STATE FINANCIAL SERVICES CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
President and Chief Executive Officer
