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EXHIBIT 2.2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
as of September 23, 1997, by and between PALFED, Inc., a South Carolina
corporation ("Issuer"), and Regions Financial Corporation, a Delaware
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement
and Plan of Merger, dated as of September 23, 1997 (the "Merger Agreement"),
providing for, among other things, the merger of a Issuer with and into Grantee,
with Grantee as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has agreed,
to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of 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 1,051,500 shares (as adjusted as set forth herein, the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of common stock, $1.00 par value per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (subject to adjustment
as set forth herein, the "Purchase Price") equal to $21.00; provided, however,
that in no event shall the number of shares of Issuer Common Stock for which
this Option is exercisable exceed 19.9% of the Issuer's 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 or Holder (as hereinafter
defined), as applicable, shall not be in material breach of its agreements or
covenants contained in this Agreement or the Merger Agreement, and (ii) no
preliminary or permanent injunction or other order against the delivery of
shares covered by the Option issued by any court of competent jurisdiction in
the United States shall be in effect, Holder may exercise the Option, in whole
or in part, at any time and from time to time following the occurrence of a
Purchase Event and prior to the termination of the Option. The Option shall
terminate and be of no further force and effect upon the earliest to occur of
(A) the Effective Time, (B) termination of the Merger Agreement in accordance
with the terms thereof prior to the occurrence of a Purchase Event or a
Preliminary Purchase Event (other than a termination of the Merger Agreement by
Grantee pursuant to (i) Section 10.1(b) thereof (but only if such termination
was a result of a willful breach by Issuer) or (ii) Section
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10.1(c) thereof (but only if such termination was the result of a willful breach
by Issuer) (each a "Default Termination")), (C) 12 months after a Default
Termination, and (D) 12 months after any termination of the Merger Agreement
following the occurrence of a Purchase Event or a Preliminary Purchase Event.
Any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable law, including, without limitation, the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). The term "Holder" shall mean
the holder or holders of the Option from time to time, and which initially is
the Grantee. The rights set forth in Section 8 shall terminate when the right to
exercise the Option terminates (other than as a result of a complete exercise of
the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the
following events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent,
Issuer shall have authorized, recommended, publicly proposed or
publicly announced an intention to authorize, recommend or propose, or
entered into an agreement with any person (other than Grantee or any
Subsidiary of Grantee) to effect an Acquisition Transaction (as defined
below). As used herein, the term Acquisition Transaction shall mean (A)
a merger, consolidation or similar transaction involving Issuer or any
of its Subsidiaries (other than transactions solely between Issuer's
Subsidiaries and transactions involving Issuer or any Subsidiary in
which the voting securities of Issuer outstanding immediately prior
thereto continue to represent (by either remaining outstanding or being
converted into securities of the surviving entity or the parent
thereof) at least 60% of the combined voting power of the voting
securities of the Issuer or the surviving entity or the parent thereof
outstanding immediately after the consummation of the transaction), (B)
except as permitted pursuant to Section 7.2 of the Merger Agreement,
the disposition, by sale, lease, exchange or otherwise, of Assets of
Issuer or any of its Subsidiaries representing in either case 25% or
more of the consolidated assets of Issuer and its Subsidiaries, or (C)
the issuance, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 25% or more of the voting power of Issuer or any of its
Subsidiaries (any of the foregoing, an "Acquisition Transaction"); or
(ii) any person (other than Grantee, any
Subsidiary of Grantee) shall have acquired beneficial ownership (as
such term is defined in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any "group"
(as such term is defined under the Exchange Act), other than a group of
which Grantee or any of its Subsidiaries of Grantee is a member, shall
have been formed which beneficially owns 25% or more of the
then-outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means
any of the following events:
(i) any person (other than Grantee or any
Subsidiary of Grantee) shall have commenced (as such term is defined in
Rule 14d-2 under the Exchange Act), or shall have filed a registration
statement under the Securities Act of 1933, as amended (the
"Securities
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Act") 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 25% 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); or
(ii) the holders of Issuer Common Stock shall not
have approved the Merger Agreement at the meeting of such stockholders
held for the purpose of voting on the Merger Agreement, such meeting
shall not have been held or shall have been canceled prior to
termination of the Merger Agreement, or Issuer's Board of Directors
shall have withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect to 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 (A) made a proposal to engage in an Acquisition
Transaction, (B) commenced a Tender Offer or filed a registration
statement under the Securities Act with respect to an Exchange Offer,
or (C) filed an application (or given a notice), whether in draft or
final form, under any federal or state statute or regulation (including
a notice filed under the HSR Act and an application or notice filed
under the BHC Act, the Bank Merger Act, or the Change in Bank Control
Act of 1978) seeking the Consent to an Acquisition Transaction from any
federal or state governmental or regulatory authority or agency.
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 Holder 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 15 business days from the Notice
Date for the closing (the "Closing") of such purchase (the "Closing Date"). If
prior Consent of any governmental or regulatory agency or authority is required
in connection with such purchase, Issuer shall cooperate with Holder in the
filing of the required notice or application for such Consent and the obtaining
of such Consent and the Closing shall occur immediately following receipt of
such Consents (and expiration of any mandatory waiting periods).
(e) Notwithstanding any other provision of this Agreement
to the contrary, in no event shall:
(i) Holder's (taking into account all other
Holders) Total Profit (as defined below) exceed $7.0 million and, if it
otherwise would exceed such amount, Holder, at its sole election, shall
either (A) reduce the number of shares of Issuer Common Stock subject
to the Option, (B) deliver to Issuer for cancellation without
consideration Option Shares previously purchased by Holder, (C) pay
cash to Issuer, or (D) any combination of the foregoing, so that
Holder's actually realized Total Profit (together with the Total Profit
realized by all other Holders) shall not exceed $7.0 million after
taking into account the foregoing actions; and
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(ii) the Option be exercised for a number of
shares of Issuer Common Stock as would, as of the date of exercise,
result in Holder's (taking into account all other Holders) Notional
Total Profit (as defined below) of more than $7.0 million; provided,
that nothing in this clause (ii) shall restrict any exercise of the
Option permitted hereby on any subsequent date.
As used in this Agreement, the term "Total Profit" shall mean the aggregate sum
(prior to the payment of taxes) of the following: (i) the amount received by
Holder pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 8; (ii) (x) the amount received by Holder pursuant to
Issuer's repurchase of Option Shares pursuant to Section 8, less (y) Holder's
purchase price for such Option Shares; (iii) (x) the net cash amounts received
by Holder pursuant to the sale of Option Shares (or any other securities into
which such Option Shares shall be converted or exchanged) to any unaffiliated
person, less (y) Holder's purchase price of such Option Shares; and (iv) any
amounts received by Grantee on the transfer of the Option (or any portion
thereof) to any unaffiliated person.
As used in this Agreement, the term "Notional Total Profit" with respect to any
number of shares of Issuer Common Stock as to which Holder may propose to
exercise the Option shall be the Total Profit determined as of the date of such
proposed exercise, assuming that the Option were exercised on such date for such
number of shares and assuming that such shares, together with all other Option
Shares held by Holder and its affiliates as of such date, were sold for cash at
the closing sale price per share of Issuer Common Stock as quoted on the
Nasdaq/NMS (or, if Issuer Common Stock is not then quoted on the Nasdaq/NMS, the
highest bid price per share as quoted on the principal trading market or
securities exchange on which such shares are traded as reported by a recognized
source chosen by Holder) as of the close of business on the preceding trading
day (less customary brokerage commissions).
The provisions of this Section 3(e) shall apply to any
Substitute Option (as defined below).
(f) Grantee agrees, promptly following any exercise of
all or any portion of the Option, and subject to its rights under Section 8, to
use commercially reasonable efforts promptly to maximize the value of Option
Shares purchased, taking into account market conditions, the number of Option
Shares, the potential negative impact of substantial sales on the market price
for Issuer Common Stock, and availability of an effective registration statement
to permit public sale of Option Shares.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder 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.
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(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no pre-emptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION
AGREEMENT DATED AS OF SEPTEMBER 23, 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: (i) the references in the above legend to
resale restrictions of the Securities Act shall be removed by delivery of
substitute certificate(s) without such reference if 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 and its counsel, to the
effect that such legend is not required for purposes of the Securities Act; (ii)
the references in the above legend to the provisions of this Agreement 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.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals
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 Issuer; provided, however,
the Issuer makes no representation or warranty with respect to whether
the issuance of shares of Issuer Common
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Stock pursuant to this Agreement requires the approval of Issuer's
stockholders. This Agreement has been duly 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 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, the number of shares of Issuer
Common Stock necessary for Holder 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 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 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, including any preemptive rights of any stockholder
of Issuer.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. 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) This Option is not being, and any Option Shares or
other securities acquired by Grantee upon exercise of the Option will
not be, acquired with a view to the public distribution thereof and
will not be transferred or otherwise disposed of except in a
transaction registered or exempt from registration under the Securities
Laws.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event 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, the type and number of
shares or securities subject to the Option, and the Purchase Price therefor,
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction, if any, so that Holder shall receive,
upon exercise of the Option, the number and class of shares or other securities
or property that Holder would have received in respect of 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) or pursuant to this
Option), the number of shares of Issuer Common Stock subject to the Option shall
be adjusted so that, after such
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issuance, it, together with any shares of Issuer Common Stock previously issued
pursuant hereto, equals 19.9% of the number of shares of Issuer Common Stock
then issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option.
(b) In the event that Issuer shall enter in 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 either (x) the
Acquiring Corporation (as defined below) or (y) any person that controls the
Acquiring Corporation (in each case, 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 the 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 for which the Substitute Option is
exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (y) Issuer in a
merger in which Issuer is the continuing or surviving person,
and (z) the transferee of all or any substantial part of the
Issuer's assets (or the assets of its Subsidiaries).
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(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
(x) the price per share of the Issuer Common Stock at which a
Tender Offer or Exchange Offer therefor has been made by any
person (other than Grantee), (y) the price per share of the
Issuer Common Stock to be paid by any person (other than the
Grantee) pursuant to an agreement with Issuer, and (z) the
highest closing sales price per share of Issuer Common Stock
quoted on the Nasdaq/NMS (or if Issuer Common Stock is not
quoted on the Nasdaq/NMS, the highest bid price per share on
any day as quoted on the principal trading market or
securities exchange on which such shares are traded as
reported by a recognized source chosen by Grantee) within the
six-month period immediately preceding the agreement;
provided, that in the event of a sale of less than 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 majority in interest of the Grantees if there
shall be more than one Grantee (a "Grantee Majority")) and
reasonably acceptable to Issuer, divided by the number of
shares of the 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 and reasonably acceptable to Issuer
(or if applicable, Acquiring Corporation). (If there shall be
more than one Grantee, any such selection shall be made by a
Grantee Majority.)
(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 merger
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
19.9% 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 19.9% 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) and reasonably acceptable to the
Acquiring Corporation.
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(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 than other shares of common stock issued by the Substitute
Option Issuer).
(h) The provisions of Sections 8, 9, 10 and 11 shall
apply, with appropriate adjustments, 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 HOLDER.
(a) Subject to Section 3(e) and to the last sentence of
Section 3(a), at the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d)) and ending 12
months immediately thereafter, Issuer shall repurchase from Holder the Option
and all shares of Issuer Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 8 is referred to as the "Request Date."
Such repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder
for any shares of Issuer Common Stock acquired by Holder pursuant to
the Option with respect to which Holder 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
Holder for each share of Issuer Common Stock with respect to which the
Option has been exercised and with respect to which Holder then has
beneficial ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8,
Issuer shall, within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock
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purchased thereunder with respect to which Holder then has beneficial ownership,
and Holder shall warrant that it has sole record and beneficial ownership of
such shares and that the same are then free and clear of all liens, claims,
charges and encumbrances of any kind whatsoever. Notwithstanding the foregoing,
to the extent that prior notification to or Consent of any governmental or
regulatory agency or authority is required in connection with the payment of all
or any portion of the Section 8 Repurchase Consideration, Holder shall have the
ongoing option to revoke its request for repurchase pursuant to Section 8, in
whole or in part, or to require that Issuer deliver from time to time that
portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
Consent 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 Consent). If any governmental or regulatory agency or authority
disapproves of any part of Issuer's proposed repurchase pursuant to this Section
8, Issuer shall promptly give notice of such fact to Holder. If any governmental
or regulatory agency or authority prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such agency or authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of
Holder's rights under this Section 8 shall terminate on the date of termination
of this Option pursuant to Section 3(a).
(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), (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), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq/NMS
(or if Issuer Common Stock is not quoted on the Nasdaq/NMS, the highest bid
price per share as quoted on the principal trading market or securities exchange
on which such shares are traded as reported by a recognized source chosen by
Holder) during the 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
an independent nationally recognized investment banking firm selected by Holder
and reasonably acceptable to Issuer (which determination shall be conclusive for
all purposes of this Agreement), 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
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investment banking firm selected by Holder 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 subsidiary of Grantee shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), or any "group" (as such term is defined under the
Exchange Act) shall have been formed which beneficially owns 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(iii) shall be consummated.
(e) In connection with the application of the provisions
of this Section 8, Grantee acknowledges (i) that Issuer's ability to fund the
Section 8 Repurchase Consideration in accordance with the provisions of this
Section 8 may be dependent upon the payment by Issuer's Subsidiaries of a
capital distribution or distributions ("Capital Distribution") to Issuer and
that any such Capital Distribution will be subject to the prior approval of the
Office of Thrift Supervision and the principal federal and state regulatory
agencies having jurisdiction over Issuer's Subsidiary banks, and (ii) that,
unless there has been an agreement of the type described in Section 7(b),
Issuer's obligations under this Section 8 do not impose on Issuer an obligation
to otherwise finance the payment of the Section 8 Repurchase Consideration
through the incurrence of indebtedness or the issuance of capital instruments or
securities by Issuer in either case sufficient in amount to satisfy the payment
of the Section 8 Repurchase Consideration. Accordingly, Issuer shall not be
deemed to be in breach of this Section 8 if, after making its best efforts to
obtain regulatory authorization for a Capital Distribution required to pay the
Section 8 Repurchase Consideration, it is unable to do so.
9. REGISTRATION RIGHTS.
(a) Issuer shall, subject to the conditions of
subparagraph (c) below, if requested by any Holder, including Grantee and any
permitted transferee ("Selling Holder"), as expeditiously as possible prepare
and file a registration statement under the Securities Laws if necessary 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
Selling Holder upon exercise of the Option in accordance with the intended
method of sale or other disposition stated by Holder in such request (it being
understood and agreed that any such sale or other disposition shall be effected
on a widely distributed basis so that, upon consummation thereof, no purchaser
or transferee shall beneficially own more than 2% of the shares of Issuer Common
Stock then outstanding), including, without limitation, 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
for sale under any applicable state securities laws. Each such Holder shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder.
(b) If Issuer at any time after the exercise of the
Option, but prior to the termination of the Option, proposes to register any
shares of Issuer Common Stock under the Securities Laws in connection with an
underwritten public offering of such Issuer Common Stock, Issuer will
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promptly give written notice to Holder of its intention to do so and, upon the
written request of Holder given within 30 days after receipt of any such notice
(which request shall specify the number of shares of Issuer Common Stock
intended to be included in such underwritten public offering by Selling Holder),
Issuer will use all reasonable efforts to cause all such shares, the holders of
which shall have requested participation in such registration, to be so
registered and included in such underwritten public offering; provided, that
Issuer may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith determine that the inclusion of such shares would
interfere with the successful marketing of the shares of Issuer Common Stock for
the account of Issuer, or (ii) in the case of a registration solely to implement
a dividend reinvestment or similar plan, an employee benefit plan or a
registration filed on Form S-4 or any successor form, or a registration filed on
a form which does not permit registrations of resales; provided, further, that
such election pursuant to clause (i) may only be made once. If some but not all
the shares of Issuer Common Stock, with respect to which Issuer shall have
received requests for registration pursuant to this subparagraph (b), shall be
excluded from such registration, Issuer shall make appropriate allocation of
shares to be registered among Selling Holders and any other person (other than
Issuer or any person exercising demand registration rights in connection with
such registration) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration pro rata in the proportion
that the number of shares requested to be registered by each Selling Holder
bears to the total number of shares requested to be registered by all persons
then desiring to have Issuer Common Stock registered for sale (other than Issuer
or any person exercising demand registration rights in connection with such
registration).
(c) Issuer shall use all reasonable efforts to cause the
registration statement referred to in subparagraph (a) above to become effective
and to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective, provided, that
Issuer may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days provided Issuer shall
in good faith determine that any such registration would adversely affect an
offering or contemplated offering of other securities by Issuer. Notwithstanding
anything to the contrary contained herein, Issuer shall not be required to
register Option Shares under the Securities Laws pursuant to subparagraph (a)
above:
(i) prior to the occurrence of a Purchase Event
and following the termination of the Option;
(ii) more than once;
(iii) within 90 days after the effective date of a
registration referred to in subparagraph (b) above pursuant to which
the Selling Holders concerned were afforded the opportunity to register
such shares under the Securities Laws and such shares were registered
as requested; and
(iv) unless a request therefor is made to Issuer
by Selling Holders holding at least 20% or more of the aggregate number
of Option Shares then outstanding or the right to acquire at least 20%
of the Option Shares.
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In addition to the foregoing, Issuer shall not be required to
maintain the effectiveness of any registration statement after the expiration of
120 days from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided, that Issuer shall not
be required to consent to general jurisdiction or qualify to do business in any
state where it is not otherwise required to so consent to such jurisdiction or
to so qualify to do business.
(d) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of Issuer's counsel), accounting expenses, printing expenses, expenses of
underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to subparagraph (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subparagraph (a) or (b) above.
Underwriting discounts and commissions relating to Option Shares and any other
expenses incurred by such Selling Holders in connection with any such
registration (including expenses of Selling Holders' counsel) shall be borne by
such Selling Holders.
(e) In connection with any registration under subparagraph (a) or
(b) above Issuer hereby agrees to indemnify the Selling Holders, and each
underwriter thereof, including each person, if any, who controls such holder or
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, losses, claims, damages and liabilities caused by any untrue statement
of a material fact contained in any registration statement or prospectus
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party are
caused by any untrue statement or alleged untrue statement or any omission or
alleged omission made in reliance upon and in conformity with, information
furnished in writing to Issuer by such indemnified party expressly for use
therein, and Issuer and each officer, director and controlling person of Issuer
shall be indemnified by such Selling Holder, or by such underwriter, as the case
may be, for all such expenses, losses, claims, damages and liabilities caused by
any untrue, or alleged untrue, statement or omission made in reliance upon, and
in conformity with, information furnished in writing to Issuer by such holder or
such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this subparagraph (e), such indemnified
party shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not
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relieve it of any liability which it may otherwise have to any indemnified party
under this subparagraph (e), except to the extent such failure to notify
materially prejudices the indemnifying party. In case notice of commencement of
any such action shall be given to the indemnifying party as above provided, the
indemnifying party shall be entitled to participate in and, to the extent it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
reasonably satisfactory to such indemnified party. The indemnified party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the indemnified party unless
(i) the indemnifying party either agrees to pay the same, (ii) the indemnifying
party falls to assume the defense of such action with counsel satisfactory to
the indemnified party, or (iii) the indemnified party has been advised by
counsel that one or more legal defenses may be available to the indemnifying
party that may be contrary to the interest of the indemnified party, in which
case the indemnifying party shall be entitled to assume the defense of such
action notwithstanding its obligation to bear fees and expenses of such counsel;
provided, however, that the indemnifying party shall not be liable for the
expenses of more than one firm of counsel for all indemnified parties in any
jurisdiction. No indemnifying party shall be liable for any settlement entered
into without its consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this subparagraph (e)
is unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, all Selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, all Selling Holders and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; provided, that in no case shall any Selling Holder be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to subparagraph
(a) or (b) above, Issuer and each Selling Holder (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
subparagraph (e).
(f) Issuer shall use its best efforts to comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any
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Option Shares by Holder in accordance with and to the extent permitted by any
rule or regulation promulgated by the SEC from time to time, including, without
limitation, Rules 144 and 144A.
(g) Issuer will pay all stamp taxes in connection with
the issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will save Holder harmless, without limitation as to
time, against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other
securities to be acquired upon exercise of the Option are then authorized for
quotation or trading or listing on the Nasdaq/NMS or any other securities
exchange or any automated quotations system maintained by a self-regulatory
organization, Issuer, upon the request of Holder, will promptly file an
application, if required, to authorize for quotation or trading or listing the
shares of Issuer Common Stock or other securities to be acquired upon exercise
of the Option on the Nasdaq/NMS or any other securities exchange or any
automated quotations system maintained by a self-regulatory organization and
will use its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
11. DIVISION OF OPTION. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of 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. MISCELLANEOUS.
(A) EXPENSES. Except as otherwise provided in Section 9,
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.
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(C) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY;
SEVERABILITY. This Agreement, together with the Merger Agreement and the other
documents and instruments referred to herein and therein, between Grantee and
Issuer (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 (other than any transferees of the Option Shares
or any permitted transferee of this Agreement pursuant to Section 12(h) and
other than as provided in the Merger Agreement) any rights or remedies
hereunder. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or a federal or state governmental or
regulatory agency or authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Option does not permit Holder to acquire, or does not require Issuer to
repurchase, the full number of shares of Issuer Common Stock as provided in
Sections 3 and 8 (as adjusted pursuant to Section 7), it is the express
intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(D) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without regard to
any applicable conflicts of law rules.
(E) DESCRIPTIVE HEADINGS. The descriptive headings
contained herein are for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
(F) NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to the parties at the addresses set forth in the Merger
Agreement(or at such other address for a party as shall be specified by like
notice).
(G) COUNTERPARTS. This Agreement and any amendments
hereto may be executed in two counterparts, each of which shall be considered
one and the same agreement and shall become effective when both counterparts
have been signed, it being understood that both parties need not sign the same
counterpart.
(H) ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option shall be assigned
by any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other party, except that Grantee may assign
this Agreement to a wholly owned Subsidiary of Grantee and Grantee may assign
its rights hereunder in whole or in part after the occurrence of a Purchase
Event. Subject to the preceding sentence, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
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(I) FURTHER ASSURANCES. In the event of any exercise of
the Option by Holder, Issuer and Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(J) SPECIFIC PERFORMANCE. The parties hereto agree that
this Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
IN WITNESS WHEREOF, 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.
ATTEST: PALFED, INC.
By: /s/ Xxxxxx X. Xxxxxx, Xx By: /s/ Xxxx X. Xxxxxxxx
-------------------------- -------------------------------------
Xxxxxx X. Xxxxxx, Xx. Xxxx X. Xxxxxxxx
Secretary President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST: REGIONS FINANCIAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx, Xx By: /s/ Xxxxxxx X. Xxxxxx
-------------------------- -------------------------------------
Xxxxxx X. Xxxxxxxx, Xx. Xxxxxxx X. Xxxxxx
Corporate Secretary Regional President
[CORPORATE SEAL]
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