EXHIBIT 10.2
EXECUTION COPY
STOCK OPTION AGREEMENT, dated January 22, 1996, between
Premier Financial Services, Inc., a Delaware corporation ("Issuer"),
and Northern Illinois Financial Corporation, an Illinois corporation
("Grantee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Grantee, Issuer and Grand Premier Financial, Inc.,
a Delaware corporation ("GPF"), have entered into an Agreement and
Plan of Reorganization of even date herewith (the "Merger Agreement"),
which agreement has been executed by the parties hereto immediately
prior to this Stock Option Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the
Merger Agreement and in consideration therefor, Issuer has agreed to
grant Grantee the Option (as hereinafter defined):
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 1,302,325 fully paid and nonassessable shares of
Issuer's Common Stock, par value $5.00 per share ("Common Stock"), at
a price of $9 per share (the "Option Price"); provided, however, that
in no event shall the number of shares of Common Stock for which this
Option is exercisable exceed 19.9% of the Issuer's issued and
outstanding shares of Common Stock without giving effect to any shares
subject to or issued pursuant to the Option. The number of shares of
Common Stock that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common
Stock are either (i) issued or otherwise become outstanding after the
date of this Agreement (other than pursuant to this Agreement) or (ii)
redeemed, repurchased, retired or otherwise cease to be outstanding
after the date of the Agreement (such event a "Change in Shares
Outstanding Event"), the number of shares of Common Stock subject to
the Option shall be increased or decreased, as appropriate, so that,
after such Change in Shares Outstanding Event, such number equals
19.9% of the number of shares of 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 or redeem, repurchase, or retire shares of Common Stock or to
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authorize either the Issuer or the Grantee otherwise to breach any
provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise
the Option, in whole or part, and from time to time, 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 that the Holder shall have sent written
notice of such exercise (as provided in subsection (e) of this Section
2) prior to the date that is 90 days after the date that Holder is
notified of such Subsequent Triggering Event pursuant to section 2(d)
herein. Each of the following shall be an Exercise Termination Event:
(i) the Effective Time (as defined in the Merger Agreement); (ii)
termination of the Merger Agreement in accordance with its terms if
such termination occurs pursuant to Section 8.1(b) or prior to the
occurrence of an Initial Triggering Event, other than a termination by
Grantee pursuant to Section 8.1(f) of the Merger Agreement, or (iii)
the passage of 12 months after termination of the Merger Agreement
(other than pursuant to Section 8.1(b)) if such termination follows,
or occurs at the same time as, the occurrence of an Initial Triggering
Event or is a termination by Grantee pursuant to Section 8.1(f) of the
Merger Agreement; provided, however, that if an Initial Triggering
Event (or an additional Initial Triggering Event) shall occur
following termination of the Merger Agreement in accordance with this
clause (iii), the Exercise Termination Event shall be the passage of
12 months from the occurrence of the Last Initial Triggering Event,
but in no event the passage of more than 18 months from the date of
termination of the Merger Agreement. The "Last Initial Triggering
Event" shall mean the last Initial Triggering Event to occur. The
term "Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any
of the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its Subsidiaries (each an
"Issuer Subsidiary"), without having received Grantee's prior written
consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as 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 GPF, Grantee or any of its
Subsidiaries (each a "Grantee Subsidiary") or the Board of Directors
of Issuer shall have recommended that the stockholders of Issuer
approve or accept any Acquisition Transaction. For purposes of this
Agreement, "Acquisition Transaction" shall mean (w) a merger or
consolidation, or any similar transaction, involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC")) of
Issuer, (x) a purchase, lease or other acquisition or assumption of
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all or a substantial portion of the assets or deposits of Issuer or
any Significant Subsidiary of Issuer, (y) a purchase or other
acquisition (including by way of merger, consolidation, share exchange
or otherwise) of securities representing 15% or more of the voting
power of Issuer or any Significant Subsidiary of Issuer, or (z) any
substantially similar transaction; provided, however, that any
transaction described in this sentence that is expressly permitted by
the Merger Agreement shall not be deemed to be an Acquisition
Transaction;
(ii) Issuer or any Issuer Subsidiary, without
having received Grantee's prior written consent, shall have
authorized, recommended, proposed or publicly announced its intention
to authorize, recommend or propose, to engage in an Acquisition
Transaction with any person other than GPF, Grantee or a Grantee
Subsidiary, or the Board of Directors of Issuer shall have publicly
withdrawn or modified, or publicly announced its intent to withdraw or
modify, in any manner adverse to Grantee, its recommendation that the
stockholders of Issuer approve the transactions contemplated by the
Merger Agreement;
(iii) (A) Any person, other than an Excluded
Person (as hereinafter defined) or an Existing 15% Shareholder (as
hereinafter defined), alone or together with such person's affiliates
and associates (such terms for purposes of this Agreement having the
meanings assigned thereto in Rule 12b-2 under the 0000 Xxx) shall have
acquired beneficial ownership or the right to acquire beneficial
ownership of 15% or more of the shares of Common Stock then
outstanding (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the
1934 Act and the rules and regulations thereunder); (B) any group
(such term for purposes of this Agreement having the meaning assigned
thereto in Section 13(d)(3) of the 1934 Act), other than a group of
which any Excluded Person is a member, shall have been formed that
acquires beneficial ownership or the right to acquire beneficial
ownership of 15% or more of the shares of Common Stock then
outstanding; (C) any Existing 15% Shareholder, alone or together with
such person's affiliates and associates, shall have acquired
beneficial ownership or the right to acquire beneficial ownership of
shares of Common Stock in addition to the shares of Common Stock
beneficially owned by such Existing 15% Shareholder as of the date
hereof. For purposes of this Agreement, "Excluded Person" shall mean
GPF, Grantee, any Grantee Subsidiary, any employee benefit plan
maintained by the Issuer or an Issuer Subsidiary as of the date of
this Agreement, any Issuer Subsidiary acting in a fiduciary capacity
in the ordinary course of its business, or the trustee and
beneficiaries of any blind voting trust under which certain shares of
Common Stock and preferred stock of the Issuer that are convertible
into Common Stock are held in accordance with the June 15, 1993 order
(the "Order") of the Federal Reserve Bank of Chicago (the "Federal
Reserve Bank") approving the transaction in which such shares were
issued. "Existing 15% Shareholder" shall mean any person, other than
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an Excluded Person, who as of the date hereof beneficially owns 15% or
more of the outstanding Common Stock.
(iv) Any person other than GPF, Grantee or any
Grantee Subsidiary shall have made a bona fide proposal to Issuer or
its stockholders by public announcement or written communication that
is or becomes the subject of public disclosure to (A) engage in an
Acquisition Transaction or (B) commence a tender or exchange offer the
consummation of which would result in such person acquiring beneficial
ownership of securities representing 15% or more of Issuer's voting
power;
(v) After an overture is made by a third party
(other than an Excluded Person) to Issuer or its stockholders to
engage in an Acquisition Transaction, Issuer shall have breached any
covenant or obligation contained in the Merger Agreement and such
breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined
below); or
(vi) Any person other than GPF, Grantee or any
Grantee Subsidiary, other than in connection with a transaction to
which Grantee has given its prior written consent, shall have filed an
application or notice with the Federal Reserve Board, or other federal
or state bank regulatory 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
either of the following events or transactions occurring after the
date hereof:
(i) The acquisition (A) by any person (other than
an Excluded Person or Existing 15% Shareholder) or group (other than a
group of which an Excluded Person is a member) of beneficial ownership
of 20% or more of the then outstanding Common Stock or (B) by an
Existing 15% Shareholder of any shares of Common Stock in addition to
the shares of Common Stock beneficially owned by such Existing 15%
Shareholder on the date hereof;
(ii) The occurrence of the Initial Triggering
Event described in paragraph (i) of subsection (b) of this Section 2,
except that the percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Initial Triggering Event or Subsequent
Triggering Event of which it has notice (together, a "Triggering
Event"), it being understood that the giving of such notice by Issuer
shall not be a condition to the right of the Holder to exercise the
Option.
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(e) In the event the Holder is entitled to and wishes
to exercise the Option, 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 60 business days from the Notice Date for
the closing of such purchase (the "Closing Date"); provided that if
prior notification to or approval of the Federal Reserve Board or any
other regulatory agency is required in connection with such purchase,
the Holder shall promptly file the required notice or application for
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
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, the Holder shall pay to Issuer the aggregate purchase
price for the shares of Common Stock purchased pursuant to the
exercise of the Option in immediately available funds by wire transfer
to a bank account designated by Issuer, provided that failure or
refusal of Issuer to designate such a bank account shall not preclude
the Holder 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 the Holder a certificate or
certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in part
only, a new Option evidencing the rights of the Holder thereof to
purchase the balance of the shares purchasable hereunder, and the
Holder shall deliver to Issuer a copy of this Agreement and a letter
agreeing that the Holder will not offer to sell or otherwise dispose
of such shares in violation of applicable law or the provisions of
this Agreement.
(h) Certificates for Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend that shall
read substantially as follows:
"The transfer of the shares represented by this certificate
is subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as
amended. A copy of such agreement is on file at the
principal office of Issuer and will be provided to the
holder hereof without charge upon receipt by Issuer of a
written request therefor."
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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 the Holder 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 1933 Act; (ii) the reference to the provisions to this
Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares have
been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of
such reference; and (iii) the legend shall be removed in its entirety
if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend
as may be required by law.
(i) Upon the giving by the Holder 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 Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder.
Issuer shall pay all expenses, and any and all United States federal,
state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of the Holder or its
assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible securities
and other rights to purchase 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 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 the Bank Holding Company Act of 1956, as amended (the
"BHCA"), or the Change in Bank Control Act of 1978, as amended, or any
state banking law, prior approval of or notice to the Federal Reserve
Board or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in
preparing such applications or notices and providing such information
to the Federal Reserve Board or such state regulatory authority as
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they may require) in order to permit the Holder to exercise the Option
and Issuer duly and effectively to issue shares of Common Stock
pursuant hereto; and (iv) promptly to take all action provided herein
to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal office
of Issuer, for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase, on the same
terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include
any Stock Option 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 or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares
of Common Stock that are purchasable upon exercise of the Option
pursuant to Section 1 of this Agreement, the number of shares of
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. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on or in
respect of the Common Stock that would be prohibited under the terms
of the Merger Agreement, or the like, the type and number of shares of
Common Stock purchasable upon exercise hereof and the Option Price
shall be appropriately adjusted in such manner as shall fully preserve
the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for
such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Issuer shall, at
the request of Grantee delivered within 90 days of such Subsequent
Triggering Event (whether on its own behalf or on behalf of any
subsequent holder of this Option (or part thereof) or any of the
shares of Common Stock issued pursuant hereto), promptly prepare and
file a registration statement under the 1933 Act covering this Option
and any shares issued and issuable pursuant to this Option and shall
use reasonable efforts to cause such registration statement to become
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effective in order to permit the sale or other disposition of this
Option and any shares of Common Stock issued upon total or partial
exercise of this Option ("Option Shares") in accordance with any plan
of disposition requested by Grantee. Issuer will use reasonable
efforts to cause such registration statement to become effective.
Grantee shall have the right to demand two such registrations. The
foregoing notwithstanding, if, at the time of any request by Grantee
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; and
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; and provided
further, however, that if such reduction occurs, then the Issuer shall
file a registration statement for the balance as promptly as practical
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. If requested by
any such Holder in connection with such registration, Issuer shall
become a party to any underwriting agreement relating to the sale of
such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements
customarily included in secondary offering underwriting agreements for
the Issuer. Upon receiving any request under this Section 6 from any
Holder, Issuer agrees to send a copy thereof to any other person known
to Issuer to be entitled to registration rights under this Section 6,
in each case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event
shall Issuer be obligated to effect more than two registrations
pursuant to this Section 6 by reason of the fact that there shall be
more than one Grantee as a result of any assignment or division of
this Agreement.
7. (a) Immediately prior to the occurrence of a
Repurchase Event (as defined below), (i) following a request of the
Holder, delivered prior to an Exercise Termination Event, Issuer (or
any successor thereto) shall repurchase the Option from the Holder 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 the owner of Option
Shares from time to time (the "Owner"), delivered within 90 days of
such occurrence (or such later period as provided in Section 10),
Issuer shall repurchase such number of the Option Shares from the
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Owner as the Owner shall designate at a price (the "Option Share
Repurchase Price") equal to the Market/Offer Price multiplied by the
number of Option Shares so designated. The term "Market/Offer Price"
shall mean the highest of (i) the price per share of Common Stock at
which a tender offer or exchange offer therefor has been made, (ii)
the price per share of Common Stock to be paid by any third party
pursuant to an agreement with Issuer, (iii) the highest closing price
for shares of Common Stock reported on the Nasdaq Stock Market's
National Market within the six-month period immediately preceding the
date the Holder gives notice of the required repurchase of this Option
or the Owner 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 a
substantial portion of Issuer's assets, the sum of the price paid in
such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally recognized
investment banking firm mutually selected by the Holder or the Owner,
as the case may be, on the one hand, and the Issuer, on the other,
divided by the number of shares of Common Stock of Issuer outstanding
at the time of such sale. In determining the Market/Offer Price, the
value of consideration other than cash shall be determined by a
nationally recognized investment banking firm mutually selected by the
Holder or Owner, as the case may be, on the one hand, and the Issuer,
on the other.
(b) The Holder and the Owner, as the case may be, 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 the Holder or the Owner, as the
case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares in accordance with the provisions of this Section 7.
Within the later to occur of (x) 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 and (y) the
time that is immediately prior to the occurrence of a Repurchase
Event, Issuer shall deliver or cause to be delivered to the Holder the
Option Repurchase Price and/or to the Owner 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 from repurchasing the Option and/or the
Option Shares in full, Issuer shall immediately so notify the Holder
and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the
portion of the Option Repurchase Price and the Option Share Repurchase
price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer
so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of this
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Section 7 is prohibited under applicable law or regulation from
delivering to the Holder and/or the Owner, as appropriate, the Option
Repurchase Price and the Option Share Repurchase Price, respectively,
in full (and Issuer hereby undertakes to use its best efforts to
obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to accomplish
such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to
the extent of the prohibition, whereupon, in the latter case, Issuer
shall promptly (i) deliver to the Holder and/or the Owner, as
appropriate, that portion of the Option Repurchase Price or the Option
Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new
Stock Option Agreement evidencing the right of the Holder to purchase
that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock
Option 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 the
Holder and the denominator of which is the Option Repurchase Price, or
(B) to the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event
shall be deemed to have occurred (i) upon the consummation of any
merger, consolidation or similar transaction involving Issuer or any
purchase, lease or other acquisition of all or a substantial portion
of the assets of Issuer, other than any such transaction which would
not constitute an Acquisition Transaction pursuant to the provisos to
Section 2(b)(i) hereof or (ii) upon the acquisition by any person of
beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a
Repurchase Event unless a Subsequent Triggering Event shall have
occurred prior to an Exercise Termination Event. The parties hereto
agree that Issuer's obligations to repurchase the Option or Option
Shares under this Section 7 shall not terminate upon the occurrence of
an Exercise Termination Event unless no Subsequent Triggering Event
shall have occurred prior to the occurrence of an Exercise Termination
Event.
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 one of its Subsidiaries,
and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee
or one of its Subsidiaries, to merge into Issuer and Issuer shall be
the continuing or surviving corporation, but, in connection with such
merger, the then outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of Common
Stock shall after such merger represent less than 50% of the
outstanding voting shares and voting share equivalents of the merged
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company, or (iii) to sell or otherwise transfer all or substantially
all of its assets to any person, other than Grantee or one of its
Subsidiaries, 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 the Holder, 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:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or merger
with Issuer (if other than Issuer), (ii) Issuer in a merger in
which Issuer is the continuing or surviving person, and (iii) the
transferee of all or substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon exercise
of the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer
Price, as defined in Section 7.
(4) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in
question, but in no event higher than the closing price of the
shares of 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 the Holder may elect; provided,
further, that in the event that the Substitute Common Stock is
not listed on a national securities exchange or the Nasdaq Stock
Market, the term "Average Price" shall mean the weighted average
of the known sale prices per share for shares of Substitute
Common Stock within the one-year period immediately preceding the
consolidation, merger or sale in question, taking into account
the sale prices, if any, for shares of Substitute Common Stock
reported in the National Association of Securities Dealers'
Electronic Bulletin Board Service or the National Quotation
Bureau's "pink sheets" during such one-year period.
(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 the
Holder. The issuer of the Substitute Option shall also enter into an
agreement with the then Holder or Holders of the Substitute Option in
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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 is equal to the
Assigned Value multiplied by the number of shares of Common Stock for
which the Option is then exercisable, divided by the Average Price.
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
Common Stock for which the Option is then exercisable 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 common stock of the issuer of the Substitute
Option (the "Substitute Option Issuer") 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 common stock
of the Substitute Option Issuer outstanding prior to exercise but for
this clause (e), the 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 this
clause (e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this clause (e). This difference in value
shall be determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and
reasonably acceptable to the Acquiring Corporation.
(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.
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
(x) 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 plus (y) Grantee's
reasonable out-of-pocket expenses (to the extent not previously
reimbursed), 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
(x) the Highest Closing Price multiplied by the number of Substitute
Shares so designated plus (y) Grantee's reasonable Out-of-Pocket
Expenses (to the extent not previously reimbursed). The term "Highest
Closing Price" shall mean the highest closing price for shares of
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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; provided, however, that in the event that the
Substitute Common Stock is not listed on a national securities
exchange or the Nasdaq Stock Market, the term "Highest Closing Price"
shall mean the highest known sale price for shares of Substitute
Common Stock within the six-month period immediately preceding the
date that 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, taking into account the sale prices, if any, for shares of
Substitute Common Stock reported in the National Association of
Securities Dealers' Electronic Bulletin Board Service or the National
Quotation Bureau's "pink sheets" during such six-month period.
(b) The Substitute Option Holder and the Substitute
Share Owner, as the case may be, may exercise its respective right 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
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, in either
case, 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 from repurchasing the
Substitute Option and/or the Substitute Shares in part or in full, the
Substitute Option Issuer following a request for repurchase pursuant
to this Section 9 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 Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five 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
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after delivery of a notice of repurchase pursuant to subsection (b) of
this Section 9 prohibited under applicable law or regulation 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 best efforts to receive all
required regulatory and legal approvals as promptly as practicable in
order to accomplish such repurchase), the Substitute Option Holder 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 the 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, or (B)
to the Substitute Share Owner, a certificate for the Substitute Common
Shares it is then so prohibited from repurchasing.
10. The 90-day period for exercise of certain rights under
Sections 2, 6, 7 and 13 shall be extended: (i) to the extent necessary
to obtain all regulatory approvals for the exercise of such rights,
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. Issuer hereby represents and warrants to Grantee as
follows:
(a) 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 Board of Directors of Issuer and no
other corporate proceedings on the part of Issuer are necessary to
authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and
delivered by Issuer.
(b) 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
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exercise of the Option, that number of shares of Common Stock equal to
the maximum number of shares of Common Stock at any time and from time
to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, 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.
(c) Neither the execution and delivery of this
Agreement by Issuer nor the consummation by Issuer of the transactions
contemplated hereby, nor compliance by Issuer with any of the terms or
provisions hereof, will (i) violate any provision of the Restated
Certificate of Incorporation or By-Laws of Issuer or (ii) assuming
that the consents and approvals referred to in Section 4.5 of the
Merger Agreement are duly obtained, (x) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Issuer or any of the Issuer Subsidiaries or
any of their respective properties or assets, or (y) violate, conflict
with, result in a breach of any provision of or the loss of any
benefit under, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of
any Lien upon any of the respective properties or assets of Issuer or
any of the Issuer Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which
Issuer or any of the Issuer Subsidiaries is a party, or by which they
or any of their respective properties or assets may be bound or
affected.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals
or consents referred to herein, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of
Grantee. This Agreement has been duly executed and delivered by
Grantee.
(b) The Option is not being, and any shares of Common
Stock 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
Securities Act.
13. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option
created hereunder to any other person, without the express written
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consent of the other party, except that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise Termination
Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period
as provided in Section 10); provided, however, that until the date 15
days following the date on which the Federal Reserve Board approves an
application by Grantee under the BHCA to acquire the shares of Common
Stock subject to the Option, Grantee may not assign its rights under
the Option except in (i) a widely dispersed public distribution, (ii)
a private placement in which no one party acquires the right to
purchase in excess of 2% of the voting shares of Issuer, (iii) an
assignment to a single party (e.g., a broker or investment banker) for
the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal
Reserve Board.
14. Each of Grantee and Issuer will use its 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 making application to list or quote the shares of Common
Stock issuable hereunder on any stock exchange or interdealer
quotation system on which the Common Stock is listed or quoted and
applying to the Federal Reserve Board under the BHCA 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 Common Stock issuable hereunder until such time,
if ever, as it deems appropriate to do so.
15. 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.
16. 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 the Holder is not permitted to acquire, or Issuer is
not permitted to repurchase pursuant to Section 7, the full number of
shares of Common Stock provided in Section 1(a) hereof (as adjusted
pursuant to Section 1(b) or 5 hereof), it is the express intention of
Issuer to allow the Holder to acquire or to require Issuer to
repurchase the greatest lesser number of shares as may be permissible,
without any amendment or modification hereof.
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17. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), mailed by registered or certified mail
(return receipt requested) or delivered by an express courier (with
confirmation) at the respective addresses of the parties set forth in
the Merger Agreement (or at such other address for a party as shall be
specified by like notice).
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, regardless of the
laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
19. 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.
20. 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.
21. 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 assigns. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party,
other than the parties hereto, and their respective successors except
as assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the Merger
Agreement.
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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.
PREMIER FINANCIAL SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------
Xxxxxxx X. Xxxxx
President and Chief
Executive Officer
NORTHERN ILLINOIS FINANCIAL
CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Xxxxxx X. Xxxxxx
President and Chief
Executive Officer
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