THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND MAY BE SUBJECT TO TRANSFER RESTRICTIONS
UNDER THE FEDERAL SECURITIES LAWS
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 10,
1997 (the "Agreement"), by and between First Citizens
Financial Corporation, a Delaware corporation ("Issuer"),
and Provident Bankshares Corporation, a Maryland
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into
an Agreement and Plan of Merger (the "Merger Agreement"),
of even date herewith, providing for, among other things,
the merger of Issuer with Grantee; and
WHEREAS, as a condition and inducement to
Grantee's execution of the Merger Agreement, Grantee has
requested that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the
foregoing and the respective representations, warranties,
covenants and agreements set forth herein and in the
Merger Agreement, and intending to be legally bound
hereby, Issuer and Grantee agree as follows:
1. Defined Terms. Capitalized terms which
are used but not defined herein shall have the meanings
ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and
conditions set forth herein, Issuer hereby grants to
Grantee an irrevocable option (the "Option") to purchase
up to 291,388 shares (subject to adjustment as set forth
herein) (the "Option Shares") of common stock, par value
$0.01 per share, of Issuer ("Issuer Common Stock") at a
purchase price (subject to adjustment as set forth
herein) of $23.00 per Option Share (the "Purchase
Price"), provided that in no event shall the number of
Option Shares for which the Option is exercisable exceed
9.9% of the issued and outstanding shares of Issuer
Common Stock without giving effect to any shares subject
to or issued pursuant to the Option.
3. Exercise of Option. (a) Provided that (i)
Grantee is not in material breach of the agreements or
covenants contained in the Merger Agreement and (ii) no
preliminary or permanent injunction or other order
against the delivery of Option Shares issued by any court
of competent jurisdiction in the United States shall be
in effect, Grantee may exercise the Option, in whole or
in 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, however, that Grantee shall have sent the
written notice of such exercise (as provided in
subsection (d) of this Section 3) within 90 days
following such Subsequent Triggering Event; and provided
further, however, that any purchase of shares upon
exercise of the Option shall be subject to compliance
with applicable law; and provided further, however, that
if the Option cannot be exercised on any day because of
any injunction, order or similar restraint issued by a
court of competent jurisdiction, the period during which
the Option may be exercised shall be extended so that the
Option shall expire no earlier than on the 10th business
day after such injunction, order or restraint shall have
been dissolved or when such injunction, order or
restraint shall have become permanent and no longer
subject to appeal, as the case may be. Each of the
following shall be an Exercise Termination Event: (i)
the Effective Time; (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; or (iii) the passage of twelve
months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial
Triggering Event; provided, however, that if an Initial
Triggering Event continues or occurs beyond such
termination and prior to the passage of such twelve-month
period, the Exercise Termination Event shall be twelve
months from the expiration of the Last Triggering Event
(as hereinafter defined) but in no event more than 15
months after such termination of the Merger Agreement.
The "Last Triggering Event" shall mean the last Initial
Triggering Event to expire. The rights set forth in
Section 8 hereof shall terminate at the time set forth in
Section 8.
(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,
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 (other than Grantee or any
of its Subsidiaries) or Issuer or any of its
Subsidiaries, 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 Grantee or a Subsidiary of
Grantee. For purposes of this Agreement,
"Acquisition Transaction" shall mean (w) a merger or
consolidation, or any similar transaction, involving
Issuer or any of its Subsidiaries (other than
internal mergers, reorganizations, consolidations or
dissolutions involving only existing Subsidiaries),
(x) a purchase, lease or other acquisition of all or
a substantial portion of the consolidated assets of
Issuer and its Subsidiaries, or (y) a purchase or
other acquisition (including by way of merger,
consolidation, Tender Offer or Exchange Offer (as
such terms are hereinafter defined), share exchange
or otherwise) of securities representing 10% or more
of the voting power of Issuer or any of its
Subsidiaries;
(ii) Any person other than Grantee or any
Subsidiary of Grantee shall have acquired beneficial
ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares
of Issuer Common Stock (the term "beneficial
ownership" for purposes of this Option Agreement
having the meaning assigned thereto in Section 13(d)
of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations
thereunder) or any person other than Grantee or any
Subsidiary of Grantee shall have commenced (as such
term is defined under the rules and regulations of
the Securities and Exchange Commission (the "SEC")),
or shall have filed or publicly disseminated a
registration statement or similar disclosure
statement with respect to, a tender offer or
exchange offer to purchase any shares of Issuer
Common Stock such that, upon consummation of such
offer, such person would own or control 10% or more
of the then outstanding shares of Issuer Common
Stock (such an offer being referred to herein as a
"Tender Offer" or an "Exchange Offer,"
respectively);
(iii)(A) the holders of Issuer Common
Stock shall not have approved the Merger Agreement
and the transactions contemplated thereby, at the
meeting of such stockholders held for the purpose of
voting on such agreement, (B) such meeting shall not
have been held or shall have been cancelled prior to
termination of the Merger Agreement, or (C) 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, in each case after it shall
have been publicly announced that any person other
than Grantee or any Subsidiary of Grantee shall have
(x) made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction,
(y) commenced a Tender Offer, or filed or publicly
disseminated a registration statement or similar
disclosure statement with respect to an Exchange
Offer, or (z) filed an application (or given a
notice), whether in draft or final form, under any
federal or state banking laws seeking regulatory
approval to engage in an Acquisition Transaction; or
(iv) Issuer shall have breached any
covenant or obligation or shall have willfully
breached any representation or warranty contained in
the Merger Agreement and such breach would entitle
Grantee to terminate the Merger Agreement in
accordance with the terms thereof (without regard to
any cure periods provided for in the Merger
Agreement unless such cure is promptly effected
without jeopardizing the consummation of the Merger
in accordance with the terms of the Merger
Agreement) after (A) a bona fide proposal is made by
any person other than Grantee or any Subsidiary of
Grantee to Issuer or its stockholders to engage in
an Acquisition Transaction, (B) any person other
than Grantee or any Subsidiary of Grantee states its
intention to Issuer or its stockholders to make a
proposal to engage in an Acquisition Transaction if
the Merger Agreement terminates, or (C) any person
other than Grantee or any Subsidiary of Grantee
shall have filed an application or notice, whether
in draft or final form, with any Governmental Entity
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 by any person of
beneficial ownership of 20% 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 3, except that the
percentage referred to in clause (y) shall be 20%.
As used in this Agreement, "Person" shall have the
meaning specified in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act.
(d) In the event Grantee is entitled to
under the terms of this Agreement 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 Option Shares
it intends to purchase pursuant to such exercise and (ii)
a place and date not earlier than three business days nor
later than 30 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing
Date"). If prior notification to or approval of any
regulatory authority is required in connection with such
purchase, Issuer shall cooperate in good faith with
Grantee in the filing of the required notice or
application for approval and the obtaining of any such
approval and the period of time that otherwise would run
pursuant to the preceding sentence shall run instead from
the date on which, as the case may be (i) any required
notification period has expired or been terminated or
(ii) such approval has been obtained, and in either
event, any requisite waiting period shall have passed.
4. Payment and Delivery of Certificates. (a)
On each Closing Date, Grantee shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank
account designated by Issuer, an amount equal to the
Purchase Price multiplied by the number of Option Shares
to be purchased on such Closing Date and (ii) present and
surrender this Agreement to the Issuer at the address of
the Issuer specified in Section 13(f) hereof.
(b) At each Closing, simultaneously with
the delivery of immediately available funds and surrender
of this Agreement as provided in Section 4(a) hereof,
Issuer shall deliver to Grantee (A) a certificate or
certificates representing the Option Shares to be
purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever, and (B) if the
Option is exercised in part only, an executed new
agreement with the same terms as this Agreement
evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder. If
Issuer shall have issued rights or any similar securities
("Rights") pursuant to any shareholder rights, poison
pill or similar plan (a "Shareholder Rights Plan") prior
or subsequent to the date of this Agreement and such
Rights remain outstanding at the time of the issuance of
any Option Shares pursuant to an exercise of all or part
of the Option hereunder, then each Option Share issued
pursuant to such exercise shall also represent the number
of Rights issued per share of Issuer Common Stock with
terms substantially the same as and at least as favorable
to Grantee as are provided under the Shareholder Rights
Plan as then in effect.
(c) In addition to any other legend that
is required by applicable law, certificates for the
Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially
as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS
CERTIFICATE MAY BE SUBJECT TO RESTRICTIONS
ARISING UNDER THE FEDERAL SECURITIES LAWS AND
PURSUANT TO THE TERMS OF A STOCK OPTION
AGREEMENT DATED AS OF MARCH 10, 1997. A COPY
OF SUCH AGREEMENT WILL BE PROVIDED TO THE
HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY
THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall
be removed by delivery of substitute certificate(s)
without such legend if Grantee shall have delivered to
Issuer a copy of a letter from the staff of the SEC, or
an opinion of outside counsel reasonably satisfactory to
Issuer in form and substance reasonably satisfactory to
Issuer and its counsel, to the effect that such legend is
not required for purposes of the Securities Act of 1933,
as amended (the "Securities Act").
5. Representations and Warranties of Issuer.
Issuer hereby represents and warrants to Grantee as
follows:
(a) Due Authorization. Issuer has full
corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate
action on the part of Issuer. This Agreement has been
duly and validly executed and delivered by Issuer.
(b) No Violation. Neither the execution
and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, nor compliance by
Issuer with any of the terms or provisions hereof, will
(i) violate any provision of the Certificate of
Incorporation (the "Organization Certificate") or Amended
ByLaws of Issuer or the certificates of incorporation,
by-laws or similar governing documents of any of its
Subsidiaries or (ii) (x) assuming that all of the
consents and approvals required under applicable law for
the purchase of Option Shares upon the exercise of the
Option are duly obtained, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Issuer or any of its
Subsidiaries, or any of their respective properties or
assets, or (y) violate, conflict with, result in a breach
of any provisions 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, pledge, security interest, charge or other
encumbrance upon any of the respective properties or
assets of Issuer or any of its 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 its Subsidiaries is a party, or by which
they or any of their respective properties or assets may
be bound or affected.
(c) Authorized Stock. Issuer has taken
all necessary corporate and other action to authorize and
reserve and to permit it to issue, and, at all times from
the date of this Agreement until the obligation to
deliver Issuer Common Stock upon the exercise of the
Option terminates, will have reserved for issuance, upon
exercise of the Option, shares of Issuer Common Stock
necessary for Grantee to exercise the Option, and Issuer
will take all necessary corporate action to authorize and
reserve for issuance all additional shares of Issuer
Common Stock (together with any Rights which may have
been issued with respect thereto) or other securities
which may be issued pursuant to Section 7 upon exercise
of the Option. The shares of Issuer Common Stock to be
issued upon due exercise of the Option, including all
additional shares of Issuer Common Stock (together with
any Rights which may have been issued with respect
thereto) or other securities which may be issuable
pursuant to Section 7, upon issuance pursuant hereto,
shall be duly and validly issued, fully paid and
nonassessable, and shall be delivered free and clear of
all liens, claims, charges and encumbrances of any kind
or nature whatsoever (except any such lien or
encumbrance created by Grantee), including any preemptive
rights of any stockholder of Issuer.
6. Representations and Warranties of Grantee.
Grantee hereby represents and warrants to Issuer that:
(a) Due Authorization. Grantee has
corporate power and authority to enter into this
Agreement and, subject to any required regulatory
approvals or consents, 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) Purchase Not for Distribution. This
Option is not being acquired with a view to the public
distribution thereof and neither this Option nor any
Option Shares will be transferred or otherwise disposed
of except in a transaction registered or exempt from
registration under the Securities Act.
7. Adjustment upon Changes in
Capitalization, etc. (a) In the event (i) of any change
in Issuer Common Stock by reason of a stock dividend,
stock split, split-up, recapitalization, combination,
exchange of shares or similar transaction or (ii) that
any Rights issued by Issuer shall become exercisable, the
type and number of shares or securities subject to the
Option, and the Purchase Price therefor, shall be
adjusted appropriately, and, in the case of any of the
transactions described in clause (i) above, proper
provision shall be made in the agreements governing such
transaction so that Grantee shall receive, upon exercise
of the Option, the number and class of shares or other
securities or property that Grantee would have received
in respect of Issuer Common Stock if the Option had been
exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares
of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in
the first sentence of this Section 7(a)), the number of
shares of Issuer Common Stock subject to the Option shall
be adjusted so that, after such issuance, the Option,
together with any shares of Issuer Common Stock
previously issued pursuant hereto, equals 9.9% of the
number of shares of Issuer Common Stock then issued and
outstanding, without giving effect to any shares subject
or previously issued pursuant to the Option.
(b) In the event that 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 Issuer Common
Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or
any other property or the outstanding shares of Issuer
Common Stock immediately prior to such merger shall after
such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company, or
(iii) to sell or otherwise transfer all or substantially
all of its assets 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
provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or
exchanged for, an option (the "Substitute Option"), at
the election of Grantee, of any of (I) the Acquiring
Corporation (as defined below), (II) any person that
controls the Acquiring Corporation or (III) in the case
of a merger described in clause (ii), the Issuer (such
person being referred to as the "Substitute Option
Issuer").
(c) The Substitute Option shall have the
same terms as the Option, provided that if the terms of
the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Grantee.
The Substitute Option Issuer shall also enter into an
agreement with the then holder or holders of the
Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be
exercisable for such number of shares of the Substitute
Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the
number of shares of Issuer Common Stock for which the
Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise
price of the Substitute Option per share of the
Substitute Common Stock (the "Substitute Purchase Price")
shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares
of the Issuer Common Stock for which the Option was
theretofore exercisable and the denominator is the number
of shares of the Substitute Common Stock for which the
Substitute Option is exercisable.
(e) The following terms have the meanings
indicated:
(I) "Acquiring Corporation" shall mean (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 the Issuer's assets (or the assets of its
Subsidiaries).
(II) "Substitute Common Stock" shall mean the
common stock issued by the Substitute Option Issuer upon
exercise of the Substitute Option.
(III) "Assigned Value" shall mean the highest of
(i) the price per share of Issuer Common Stock at which a
tender offer or exchange offer therefor has been made by
any person (other than Grantee), (ii) the price per share
of Issuer Common Stock to be paid by any person (other
than the Grantee) pursuant to an agreement with Issuer,
and (iii) the highest closing sales price per share of
Issuer Common Stock quoted on National Association of
Securities Dealers, Inc. Automated Quotation/National
Market System ("NASDAQ") (or if Issuer Common Stock is
not quoted on NASDAQ, the highest bid price per share as
quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a
recognized source) within the six-month period
immediately preceding the agreement referred to in
Section 7(c) hereof; provided, however, that in the event
of a sale of all or substantially all of Issuer's assets,
the Assigned Value shall be 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 selected by
Grantee or by a Grantee Majority (as defined below),
divided by the number of shares of Issuer Common Stock
outstanding at the time of such sale. In the event that
an exchange offer is made for the Issuer Common Stock or
an agreement is entered into for a merger or
consolidation involving consideration other than cash,
the value of the securities or other property issuable or
deliverable in exchange for the Issuer Common Stock shall
be determined by a nationally recognized investment
banking firm selected by Grantee (or a majority of
interest of the Grantees if there shall be more than one
Grantee (a "Grantee Majority")) and reasonably acceptable
to Issuer, which determination shall be conclusive for
all purposes of this Agreement.
(IV) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the
one year immediately preceding the consolidation, merger
or sale in question, but in no event higher than the
closing price of the shares of the Substitute Common
Stock on the day preceding such consolidation, merger or
sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by Issuer,
the person merging into Issuer or by any company which
controls or is controlled by such merging person, as
Grantee may elect.
(f) In no event, pursuant to any of the
foregoing paragraphs, shall the Substitute Option be
exercisable for more than 9.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior
to exercise of the Substitute Option. In the event that
the Substitute Option would be exercisable for more than
9.9% of the aggregate of the shares of Substitute Common
Stock but for this clause (f), the Substitute Option
Issuer shall make a cash payment to Grantee equal to the
excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over
(ii) the value of the Substitute Option after giving
effect to the limitation in this clause (f). This
difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee
(or a Grantee Majority).
(g) Issuer shall not enter into any
transaction described in subsection (b) of this Section 7
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 7 are given full force and effect
(including, without limitation, any action that may be
necessary so that the shares of Substitute Common Stock
are in no way distinguishable from or have lesser
economic value (other than any diminution in value
resulting from the fact that the shares of Substitute
Common Stock may be restricted securities, as defined in
Rule 144 under the Securities Act) than other shares of
common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9 and
10 shall apply to any securities for which the Option
becomes exercisable pursuant to this Section 7 and, as
applicable, references in such sections to "Issuer",
"Option", "Purchase Price" and "Issuer Common Stock"
shall be deemed to be references to "Substitute Option
Issuer", "Substitute Option", "Substitute Purchase Price"
and "Substitute Common Stock", respectively.
8. Repurchase at the Option of Grantee. (a)
At the request of Grantee at any time commencing upon the
first occurrence of a Repurchase Event (as defined in
Section 8(d) below) and ending 12 months immediately
thereafter, Issuer shall repurchase from Grantee (I) the
Option and (II) all shares of Issuer Common Stock
purchased by Grantee pursuant hereto with respect to
which Grantee then has beneficial ownership. The date on
which Grantee exercises its rights under this Section 8
is referred to as the "Request Date". Such repurchase
shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price
paid by Grantee for any shares of Issuer Common
Stock acquired pursuant to the Option with
respect to which Grantee then has beneficial
ownership;
(ii) the excess, if any, of (x) the
Applicable Price (as defined below) for each
share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant
to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to
which the Option has not been exercised; and
(iii) the excess, if any, of the
Applicable Price over the Purchase Price
(subject to adjustment pursuant to Section 7)
paid (or, in the case of Option Shares with
respect to which the Option has been exercised
but the Closing Date has not occurred, payable)
by Grantee for each share of Issuer Common
Stock with respect to which the Option has been
exercised and with respect to which Grantee
then has beneficial ownership, multiplied by
the number of such shares.
(b) If Grantee exercises its rights under
this Section 8, Issuer shall, within 10 business days
after the Request Date, pay the Section 8 Repurchase
Consideration to Grantee in immediately available funds
by wire transfer to a bank account designated by Grantee,
and Grantee shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock
purchased thereunder with respect to which Grantee then
has beneficial ownership, and Grantee shall warrant that
it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all
liens, claims, charges and encumbrances of any kind
whatsoever. Notwithstanding the foregoing, to the extent
that prior notification to or approval of any regulatory
authority is required in connection with the payment of
all or any portion of the Section 8 Repurchase
Consideration, Grantee shall have the ongoing option to
revoke its request for repurchase pursuant to Section 8
or to require that Issuer (a) deliver from time to time
that portion of the Section 8 Repurchase Consideration
that it is not then so prohibited from paying and (b)
promptly file the required notice or application for
approval and expeditiously process the same (and each
party shall cooperate with the other in the filing of any
such notice or application and the obtaining of any such
approval). If any regulatory authority disapproves of
any part of Issuer's proposed repurchase pursuant to this
Section 8, Issuer shall promptly give notice of such fact
to Grantee and redeliver to Grantee the Option and/or
Option Shares it is then prohibited from repurchasing,
and Grantee shall have the right (x) to exercise the
Option as to the number of Option Shares for which the
Option was exercisable at the Request Date less the
number of shares covered by the Option in respect of
which payment has been made pursuant to Section 8(a)(ii)
hereof or (y) to revoke its request for repurchase with
respect to any Option Shares in respect of which such
payment has been made and exercise the Option as to the
number of Option Shares for which the Option was
exercisable at the Request Date. Notwithstanding
anything herein to the contrary, (i) all of Grantee's
rights under this Section 8 shall terminate on the date
of termination of this Option pursuant to Section 3(a)
hereof, unless this Option shall have been exercised in
whole or part prior to the date of termination and (ii)
if this Option shall have been exercised in whole or in
part prior to the date of termination described in clause
(i) above, then Grantee's rights under this Section 8
shall terminate 12 months after such date of termination.
(c) For purposes of this Agreement, the
"Applicable Price" means the highest of (i) the highest
price per share of Issuer Common Stock paid for any such
share by the person or groups described in Section
8(d)(i) hereof, (ii) the price per share of Issuer Common
Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or
7(b)(iii) hereof or (iii) the highest closing sales price
per share of Issuer Common Stock quoted on NASDAQ (or if
Issuer Common Stock is not quoted on NASDAQ, the highest
bid price per share as quoted on the principal trading
market or securities exchange on which such shares are
traded as reported by a recognized source) during the 60
business days preceding the Request Date; provided,
however, that in the event of a sale of less than all of
Issuer's assets, the Applicable Price shall be the sum of
the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer,
as determined by a nationally recognized investment
banking firm selected by Grantee, divided by the number
of shares of the Issuer Common Stock outstanding at the
time of such sale. If the consideration to be offered,
paid or received pursuant to either of the foregoing
clauses (i) or (ii) shall be other than in cash, the
value of such consideration shall be determined in good
faith by an independent nationally recognized investment
banking firm selected by Grantee (or a Grantee Majority)
and reasonably acceptable to Issuer, which determination
shall be conclusive for all purposes of this Agreement.
(d) As used herein, a "Repurchase Event"
shall occur if (i) any person (other than Grantee or any
of its Subsidiaries) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 under
the Exchange Act) or the right to acquire beneficial
ownership of, or any "group" (as such term is defined
under the Exchange Act) (other than Grantee or any
Subsidiary of Grantee) shall have been formed which
beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares
of Issuer Common Stock or (ii) any of the transactions
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii)
hereof shall be consummated.
(e) Notwithstanding anything herein to
the contrary, the aggregate amount payable to Grantee
pursuant to this Section 8 shall not exceed $3,500,000.
9. Registration Rights. Issuer shall, if
requested by Grantee (or if applicable, a Grantee
Majority) at any time and from time to time within two
years of the date on which the Option first becomes
exercisable, provided that such period of time shall be
extended by the number of days, if any, by which Issuer
shall delay the registration of the Issuer Common Stock
pursuant to the proviso contained at the end of this
sentence, as expeditiously as possible prepare and file
up to two registration statements under the Securities
Act if such registration is necessary (or in any event up
to two suitable disclosure statements for federal
securities law purposes if no such registration is
required under the Securities Act) in order to permit the
sale or other disposition of any or all shares of Issuer
Common Stock or other securities that have been acquired
by or are issuable to Grantee upon exercise of the Option
in accordance with the intended method of sale or other
disposition stated by Grantee, including a "shelf"
registration statement under Rule 415 under the
Securities Act or any successor provision, and Issuer
shall use its best efforts to qualify such shares or
other securities under any applicable state securities
laws; provided, however, that Issuer may delay for a
period not to exceed 90 days filing a registration or
equivalent statement if Issuer shall in good faith
determine that (i) any such registration would adversely
affect an offering or contemplated offering of securities
by Issuer or (ii) the filing of such registration or
equivalent statement would, if not so delayed, materially
and adversely affect a then proposed or pending financial
project, acquisition, merger or corporate reorganization;
and provided further, that nothing contained herein shall
limit or adversely affect in any manner Grantee's rights
contained in the fourth following sentence hereof.
Issuer shall use its best efforts to cause each such
registration statement to become effective, to obtain all
consents or waivers of other parties which are required
therefor and to keep such registration statement
effective for such period not in excess of 180 days from
the day such registration statement first becomes
effective as may be reasonably necessary to effect such
sale or other disposition. Any registration or similar
statement prepared and filed under this Section 9, and
any sale covered thereby, shall be at Issuer's expense
except for underwriting discounts or commissions,
brokers' fees and the fees and disbursements of Grantee's
counsel related thereto. Grantee shall provide all
information reasonably requested by Issuer for inclusion
in any registration or similar statement to be filed
hereunder. If during the time periods referred to in the
first sentence of this Section 9 Issuer effects a registration
under the Securities Act of Issuer Common Stock for its own
account or for any other stockholder of Issuer (other than on
Form S-4 or Form S-8, or any successor forms or any form
with respect to a dividend reinvestment or similar plan),
it shall allow Grantee the right to participate in such
registration, and such participation shall not affect the
obligation of Issuer to effect two registration
statements for Grantee under this Section 9; provided,
however, that, if the managing underwriters of such
offering advise Issuer in writing that in their opinion
the number of shares of Issuer Common Stock requested by
Grantee to be included in such registration, together
with the shares of Issuer Common Stock proposed to be
included in such registration, exceeds the number which
can be sold in such offering, Issuer shall include the
shares requested to be included therein by Grantee pro
rata with the shares intended to be included therein by
Issuer. In connection with any registration pursuant to
this Section 9, Issuer and Grantee shall provide each
other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification
and contribution in connection with such registration.
Notwithstanding anything to the contrary contained
herein, Issuer shall not be required to register Option
Shares pursuant to this Section 9 (i) prior to the
occurrence of a Subsequent Triggering Event, (ii) within
90 days after the effective date of a registration
referred to in the second preceding sentence pursuant to
which Grantee was afforded the opportunity to register
Option Shares and such shares were registered as
requested, (iii) unless a request therefor is made to
Issuer by a Grantee or Grantees which hold at least 25%
of the aggregate number of Option Shares (including
shares of Issuer Common Stock upon exercise of the
Option) then outstanding and (iv) on more than two
occasions by reason of the fact that there shall be more
than one Grantee as a result of any assignment of this
Agreement or division of this Agreement pursuant to
Section 11 hereof.
10. Listing. If Issuer Common Stock or any
other securities to be acquired upon exercise of the
Option are then authorized for quotation on NASDAQ or any
securities exchange, Issuer, upon the request of Grantee,
will promptly file an application to authorize for
quotation the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on
NASDAQ or such other securities exchange and will use its
best efforts to obtain approval of such listing as soon
as practicable.
11. Division of Option. Upon the occurrence
of a Subsequent Triggering Event, this Agreement (and the
Option granted hereby) are exchangeable, without expense,
at the option of Grantee, upon presentation and surrender
of this Agreement at the principal office of Issuer for
other Agreements providing for Options of different
denominations entitling the holder thereof to purchase in
the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any other Agreements and
related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by 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.
12. Rights Agreement. Issuer shall not
approve, adopt or amend, or propose the approval and
adoption or amendment of, any Shareholder Rights Plan
unless such Shareholder Rights Plan contains terms which
provide, to the reasonable satisfaction of Grantee, that
(a) the Rights issued pursuant thereto will not become
exercisable by virtue of the fact that Grantee is the
Beneficial Owner of shares of Issuer Common Stock (x)
acquired or acquirable pursuant to the grant or exercise
of this Option and (y) held by Grantee or any of its
Subsidiaries as Trust Account Shares or DPC Shares and
(b) no restrictions or limitations with respect to the
exercise of any Rights acquired or acquirable by Grantee
will result or be imposed to the extent such Rights
relate to the shares of Issuer Common Stock described in
clause (a) of this Section 12. This covenant shall
survive for so long as Grantee is the Beneficial Owner of
the shares of Issuer Common Stock described in clause
(a)(x) of this Section 12.
13. Miscellaneous. (a) Expenses. Except as
otherwise 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.
(b) Waiver and Amendment. Any provision
of this Agreement may be waived at any time by the party
that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(c) Entire Agreement; No Third-Party
Beneficiary; Severability. This Agreement, together with
the Merger Agreement and the other agreements and
instruments referred to herein and therein, (a)
constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral,
between the parties with respect to the subject matter
hereof and (b) is not intended to confer upon any person
other than the parties hereto any rights or remedies
hereunder. Notwithstanding anything to the contrary
contained in this Agreement or the Merger Agreement, this
Agreement shall be deemed to amend the confidentiality
agreement, dated as of February 3, 1997, between Issuer
and Grantee so as to permit Grantee to enter into this
Agreement and exercise all of its rights hereunder,
including its right to acquire Issuer Common Stock upon
exercise of the Option. If any term, provision, covenant
or restriction of this Agreement is held by a court of
competent jurisdiction or a federal or state regulatory
agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or
invalidated. If for any reason such court or regulatory
agency determines that the Option does not permit Grantee
to acquire the full number of shares of Issuer Common
Stock as provided in Section 3 hereof (as adjusted
pursuant to Section 7 hereof), it is the express
intention of Issuer to allow Grantee to acquire such
lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) Governing Law. This Agreement shall
be governed and construed in accordance with the laws of
the State of Maryland without regard to any applicable
conflicts of law rules.
(e) Descriptive Headings. The
descriptive headings contained herein are for convenience
of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail
(return receipt requested) to the parties at the
following addresses (or at such other address for a party
as shall be specified by like notice):
If to Issuer to:
First Citizens Financial Corporation
00 Xxxxx Xxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx, Esq.
If to Grantee to:
Provident Bankshares Corporation
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
with a copy to:
Xxxxxxx, Xxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
(g) Counterparts. This Agreement and any
amendments hereto may be executed in two counterparts,
each of which shall be considered one and the same
agreement and shall become effective when both
counterparts have been signed, it being understood that
both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement
nor any of the rights, interests or obligations hereunder
or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other party,
except that Grantee may assign this Agreement to a wholly
owned subsidiary of Grantee and after the occurrence of a
Subsequent Triggering Event Grantee may assign its rights
under this Agreement to one or more third parties.
Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of and be
enforceable by the parties and their respective
successors and assigns. As used in this Agreement,
Grantee shall include any person to whom this Agreement
or the Option shall be assigned by a previous Grantee in
accordance with the terms hereof.
(i) Further Assurances. In the event of
any exercise of the Option by Grantee, Issuer and Grantee
shall execute and deliver all other documents and
instruments and take all other action that may be
reasonably necessary in order to consummate the
transactions provided for by such exercise.
(j) Specific Performance. The parties
hereto agree that this Agreement may be enforced by
either party through specific performance, injunctive
relief and other equitable relief. Both parties further
agree to waive any requirement for the securing or
posting of any bond in connection with the obtaining of
any such equitable relief and that this provision is
without prejudice to any other rights that the parties
hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have
caused this Stock Option Agreement to be signed by their
respective officers thereunto duly authorized, all as of
the day and year first written above.
FIRST CITIZENS FINANCIAL CORPORATION
By ------------------------------
Name: Xxxx X. Xxx
Title: President
PROVIDENT BANKSHARES CORPORATION
By ------------------------------
Name: Xxxx X. Xxxxxx
Title: Chairman and CEO
