STOCK OPTION AGREEMENT, dated January 22, 1996, between
Premier Financial Services, Inc., a Delaware corporation
("Issuer"), and Northern Illinois Financial Corporation, an
Illinois corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee, Issuer and Grand Premier Financial,
Inc., a Delaware corporation ("GPF"), have entered into an
Agreement and Plan of Reorganization of even date herewith (the
"Merger Agreement"), which agreement has been executed by the
parties hereto immediately prior to this Stock Option Agreement
(the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the
Merger Agreement and in consideration therefor, Issuer has agreed
to grant Grantee the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Merger
Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to purchase,
subject to the terms hereof, up to 1,302,325 fully paid and
nonassessable shares of Issuer's Common Stock, par value $5.00 per
share ("Common Stock"), at a price of $9 per share (the "Option
Price"); provided, however, that in no event shall the number of
shares of Common Stock for which this Option is exercisable exceed
19.9% of the Issuer's issued and outstanding shares of Common Stock
without giving effect to any shares subject to or issued pursuant
to the Option. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are
subject to adjustment as herein set forth.
(b) In the event that any additional shares of
Common Stock are either (i) issued or otherwise become outstanding
after the date of this Agreement (other than pursuant to this
Agreement) or (ii) redeemed, repurchased, retired or otherwise
cease to be outstanding after the date of the Agreement (such event
a "Change in Shares Outstanding Event"), the number of shares of
Common Stock subject to the Option shall be increased or decreased,
as appropriate, so that, after such Change in Shares Outstanding
Event, such number equals 19.9% of the number of shares of Common
Stock then issued and outstanding without giving effect to any
shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed
to authorize Issuer to issue or redeem, repurchase, or retire
shares of Common Stock or to authorize either the Issuer or the
Grantee otherwise to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may
exercise the Option, in whole or part, and from time to time, if,
but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the
Holder shall have sent written notice of such exercise (as provided
in subsection (e) of this Section 2) prior to the date that is 90
days after the date that Holder is notified of such Subsequent
Triggering Event pursuant to section 2(d) herein. Each of the
following shall be an Exercise Termination Event: (i) the
Effective Time (as defined in the Merger Agreement); (ii)
termination of the Merger Agreement in accordance with its terms if
such termination occurs pursuant to Section 8.1(b) or prior to the
occurrence of an Initial Triggering Event, other than a termination
by Grantee pursuant to Section 8.1(f) of the Merger Agreement, or
(iii) the passage of 12 months after termination of the Merger
Agreement (other than pursuant to Section 8.1(b)) if such
termination follows, or occurs at the same time as, the occurrence
of an Initial Triggering Event or is a termination by Grantee
pursuant to Section 8.1(f) of the Merger Agreement; provided,
however, that if an Initial Triggering Event (or an additional
Initial Triggering Event) shall occur following termination of the
Merger Agreement in accordance with this clause (iii), the Exercise
Termination Event shall be the passage of 12 months from the
occurrence of the Last Initial Triggering Event, but in no event
the passage of more than 18 months from the date of termination of
the Merger Agreement. The "Last Initial Triggering Event" shall
mean the last Initial Triggering Event to occur. The term "Holder"
shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean
any of the following events or transactions occurring after the
date hereof:
(i) Issuer or any of its Subsidiaries (each an
"Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to engage in
an Acquisition Transaction (as hereinafter defined) with any person
(the term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
the rules and regulations thereunder) other than GPF, Grantee or
any of its Subsidiaries (each a "Grantee Subsidiary") or the Board
of Directors of Issuer shall have recommended that the stockholders
of Issuer approve or accept any Acquisition Transaction. For
purposes of this Agreement, "Acquisition Transaction" shall mean
(w) a merger or consolidation, or any similar transaction,
involving Issuer or any Significant Subsidiary (as defined in Rule
1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (x) a purchase, lease or other
acquisition or assumption of all or a substantial portion of the
assets or deposits of Issuer or any Significant Subsidiary of
Issuer, (y) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities
representing 15% or more of the voting power of Issuer or any
Significant Subsidiary of Issuer, or (z) any substantially similar
transaction; provided, however, that any transaction described in
this sentence that is expressly permitted by the Merger Agreement
shall not be deemed to be an Acquisition Transaction;
(ii) Issuer or any Issuer Subsidiary, without
having received Grantee's prior written consent, shall have
authorized, recommended, proposed or publicly announced its
intention to authorize, recommend or propose, to engage in an
Acquisition Transaction with any person other than GPF, Grantee or
a Grantee Subsidiary, or the Board of Directors of Issuer shall
have publicly withdrawn or modified, or publicly announced its
intent to withdraw or modify, in any manner adverse to Grantee, its
recommendation that the stockholders of Issuer approve the
transactions contemplated by the Merger Agreement;
(iii) (A) Any person, other than an Excluded
Person (as hereinafter defined) or an Existing 15% Shareholder (as
hereinafter defined), alone or together with such person's
affiliates and associates (such terms for purposes of this
Agreement having the meanings assigned thereto in Rule 12b-2 under
the 0000 Xxx) shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 15% or more of the shares of
Common Stock then outstanding (the term "beneficial ownership" for
purposes of this Agreement having the meaning assigned thereto in
Section 13(d) of the 1934 Act and the rules and regulations
thereunder); (B) any group (such term for purposes of this
Agreement having the meaning assigned thereto in Section 13(d)(3)
of the 1934 Act), other than a group of which any Excluded Person
is a member, shall have been formed that acquires beneficial
ownership or the right to acquire beneficial ownership of 15% or
more of the shares of Common Stock then outstanding; (C) any
Existing 15% Shareholder, alone or together with such person's
affiliates and associates, shall have acquired beneficial ownership
or the right to acquire beneficial ownership of shares of Common
Stock in addition to the shares of Common Stock beneficially owned
by such Existing 15% Shareholder as of the date hereof. For
purposes of this Agreement, "Excluded Person" shall mean GPF,
Grantee, any Grantee Subsidiary, any employee benefit plan
maintained by the Issuer or an Issuer Subsidiary as of the date of
this Agreement, any Issuer Subsidiary acting in a fiduciary
capacity in the ordinary course of its business, or the trustee and
beneficiaries of any blind voting trust under which certain shares
of Common Stock and preferred stock of the Issuer that are
convertible into Common Stock are held in accordance with the June
15, 1993 order (the "Order") of the Federal Reserve Bank of Chicago
(the "Federal Reserve Bank") approving the transaction in which
such shares were issued. "Existing 15% Shareholder" shall mean any
person, other than an Excluded Person, who as of the date hereof
beneficially owns 15% or more of the outstanding Common Stock.
(iv) Any person other than GPF, Grantee or any
Grantee Subsidiary shall have made a bona fide proposal to Issuer
or its stockholders by public announcement or written communication
that is or becomes the subject of public disclosure to (A) engage
in an Acquisition Transaction or (B) commence a tender or exchange
offer the consummation of which would result in such person
acquiring beneficial ownership of securities representing 15% or
more of Issuer's voting power;
(v) After an overture is made by a third party
(other than an Excluded Person) to Issuer or its stockholders to
engage in an Acquisition Transaction, Issuer shall have breached
any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger
Agreement and (y) shall not have been cured prior to the Notice
Date (as defined below); or
(vi) Any person other than GPF, Grantee or any
Grantee Subsidiary, other than in connection with a transaction to
which Grantee has given its prior written consent, shall have filed
an application or notice with the Federal Reserve Board, or other
federal or state bank regulatory authority, which application or
notice has been accepted for processing, for approval to engage in
an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall
mean either of the following events or transactions occurring after
the date hereof:
(i) The acquisition (A) by any person (other
than an Excluded Person or Existing 15% Shareholder) or group
(other than a group of which an Excluded Person is a member) of
beneficial ownership of 20% or more of the then outstanding Common
Stock or (B) by an Existing 15% Shareholder of any shares of Common
Stock in addition to the shares of Common Stock beneficially owned
by such Existing 15% Shareholder on the date hereof;
(ii) The occurrence of the Initial Triggering
Event described in paragraph (i) of subsection (b) of this Section
2, except that the percentage referred to in clause (y) shall be
20%.
(d) Issuer shall notify Grantee promptly in writing
of the occurrence of any Initial Triggering Event or Subsequent
Triggering Event of which it has notice (together, a "Triggering
Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and
wishes to exercise the Option, it shall send to Issuer a written
notice (the date of which being herein referred to as the "Notice
Date") specifying (i) the total number of shares it will purchase
pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing Date");
provided that if prior notification to or approval of the Federal
Reserve Board or any other regulatory agency is required in
connection with such purchase, the Holder shall promptly file the
required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which
any required notification periods have expired or been terminated
or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option
shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of
this Section 2, the Holder shall pay to Issuer the aggregate
purchase price for the shares of Common Stock purchased pursuant to
the exercise of the Option in immediately available funds by wire
transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall
not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the
delivery of immediately available funds as provided in subsection
(f) of this Section 2, Issuer shall deliver to the Holder a
certificate or certificates representing the number of shares of
Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable
hereunder, and the Holder shall deliver to Issuer a copy of this
Agreement and a letter agreeing that the Holder will not offer to
sell or otherwise dispose of such shares in violation of applicable
law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend that
shall read substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an
agreement between the registered holder hereof and Issuer
and to resale restrictions arising under the Securities
Act of 1933, as amended. A copy of such agreement is on
file at the principal office of Issuer and will be
provided to the holder hereof without charge upon receipt
by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933
Act"), in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Holder
shall have delivered to Issuer a copy of a letter from the staff of
the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the
provisions to this Agreement in the above legend shall be removed
by delivery of substitute certificate(s) without such reference if
the shares have been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall
be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under
subsection (e) of this Section 2 and the tender of the applicable
purchase price in immediately available funds, the Holder shall be
deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually
delivered to the Holder. Issuer shall pay all expenses, and any
and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation,
issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Common Stock so that the Option may
be exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible
securities and other rights to purchase Common Stock; (ii) that it
will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to
be observed or performed hereunder by Issuer; (iii) promptly to
take all action as may from time to time be required (including (x)
complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. ()18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank
Control Act of 1978, as amended, or any state banking law, prior
approval of or notice to the Federal Reserve Board or to any state
regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the
Federal Reserve Board or such state regulatory authority as they
may require) in order to permit the Holder to exercise the Option
and Issuer duly and effectively to issue shares of Common Stock
pursuant hereto; and (iv) promptly to take all action provided
herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any Stock Option Agreements and related Options
for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute
and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
5. In addition to the adjustment in the number of
shares of Common Stock that are purchasable upon exercise of the
Option pursuant to Section 1 of this Agreement, the number of
shares of Common Stock purchasable upon the exercise of the Option
and the Option Price shall be subject to adjustment from time to
time as provided in this Section 5. In the event of any change in,
or distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on or
in respect of the Common Stock that would be prohibited under the
terms of the Merger Agreement, or the like, the type and number of
shares of Common Stock purchasable upon exercise hereof and the
Option Price shall be appropriately adjusted in such manner as
shall fully preserve the economic benefits provided hereunder and
proper provision shall be made in any agreement governing any such
transaction to provide for such proper adjustment and the full
satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Issuer shall,
at the request of Grantee delivered within 90 days of such
Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly
prepare and file a registration statement under the 1933 Act
covering this Option and any shares issued and issuable pursuant to
this Option and shall use reasonable efforts to cause such
registration statement to become effective in order to permit the
sale or other disposition of this Option and any shares of Common
Stock issued upon total or partial exercise of this Option ("Option
Shares") in accordance with any plan of disposition requested by
Grantee. Issuer will use reasonable efforts to cause such
registration statement to become effective. Grantee shall have the
right to demand two such registrations. The foregoing
notwithstanding, if, at the time of any request by Grantee for
registration of the Option or Option Shares as provided above,
Issuer is in registration with respect to an underwritten public
offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or,
if none, the sole underwriter or underwriters, of such offering,
the inclusion of the Holder's Option or Option Shares would
interfere with the successful marketing of the shares of Common
Stock offered by Issuer, the number of Option Shares otherwise to
be covered in the registration statement contemplated hereby may be
reduced; and provided, however, that after any such required
reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least
25% of the total number of shares to be sold by the Holder and
Issuer in the aggregate; and provided further, however, that if
such reduction occurs, then the Issuer shall file a registration
statement for the balance as promptly as practical and no reduction
shall thereafter occur. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If requested by any
such Holder in connection with such registration, Issuer shall
become a party to any underwriting agreement relating to the sale
of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other
agreements customarily included in secondary offering underwriting
agreements for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the
same, postage prepaid, to the address of record of the persons
entitled to receive such copies. Notwithstanding anything to the
contrary contained herein, in no event shall Issuer be obligated to
effect more than two registrations pursuant to this Section 6 by
reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a
Repurchase Event (as defined below), (i) following a request of the
Holder, delivered prior to an Exercise Termination Event, Issuer
(or any successor thereto) shall repurchase the Option from the
Holder at a price (the "Option Repurchase Price") equal to the
amount by which (A) the Market/Offer price (as defined below)
exceeds (B) the Option Price, multiplied by the number of shares
for which this Option may then be exercised and (ii) at the request
of the owner of Option Shares from time to time (the "Owner"),
delivered within 90 days of such occurrence (or such later period
as provided in Section 10), Issuer shall repurchase such number of
the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the
Market/Offer Price multiplied by the number of Option Shares so
designated. The term "Market/Offer Price" shall mean the highest of
(i) the price per share of Common Stock at which a tender offer or
exchange offer therefor has been made, (ii) the price per share of
Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common
Stock reported on the Nasdaq Stock Market's National Market within
the six-month period immediately preceding the date the Holder
gives notice of the required repurchase of this Option or the Owner
gives notice of the required repurchase of Option Shares, as the
case may be, or (iv) in the event of a sale of all or a substantial
portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining
assets of Issuer as determined by a nationally recognized
investment banking firm mutually selected by the Holder or the
Owner, as the case may be, on the one hand, and the Issuer, on the
other, divided by the number of shares of Common Stock of Issuer
outstanding at the time of such sale. In determining the
Market/Offer Price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking
firm mutually selected by the Holder or Owner, as the case may be,
on the one hand, and the Issuer, on the other.
(b) The Holder and the Owner, as the case may be,
may exercise its right to require Issuer to repurchase the Option
and any Option Shares pursuant to this Section 7 by surrendering
for such purpose to Issuer, at its principal office, a copy of this
Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with
the provisions of this Section 7. Within the later to occur of (x)
five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such
notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer
shall deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share Repurchase
Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation from repurchasing the Option and/or
the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase price, respectively, that it is no longer
prohibited from delivering, within five business days after the
date on which Issuer is no longer so prohibited; provided, however,
that if Issuer at any time after delivery of a notice of repurchase
pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation from delivering to the Holder and/or
the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer
hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase),
the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Holder, a new Stock
Option Agreement evidencing the right of the Holder to purchase
that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock
Option Agreement was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the
Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option
Repurchase Price, or (B) to the Owner, a certificate for the Option
Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase
Event shall be deemed to have occurred (i) upon the consummation of
any merger, consolidation or similar transaction involving Issuer
or any purchase, lease or other acquisition of all or a substantial
portion of the assets of Issuer, other than any such transaction
which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition
by any person of beneficial ownership of 50% or more of the then
outstanding shares of Common Stock, provided that no such event
shall constitute a Repurchase Event unless a Subsequent Triggering
Event shall have occurred prior to an Exercise Termination Event.
The parties hereto agree that Issuer's obligations to repurchase
the Option or Option Shares under this Section 7 shall not
terminate upon the occurrence of an Exercise Termination Event
unless no Subsequent Triggering Event shall have occurred prior to
the occurrence of an Exercise Termination Event.
8. (a) In the event that prior to an Exercise
Termination Event, Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or
one of its Subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its Subsidiaries,
to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the
then outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash
or any other property or the then outstanding shares of Common
Stock shall after such merger represent less than 50% of the
outstanding voting shares and voting share equivalents of the
merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee
or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person
that controls the Acquiring Corporation.
(b) The following terms have the meanings
indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in a
merger in which Issuer is the continuing or surviving person,
and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer
Price, as defined in Section 7.
(4) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one
year immediately preceding the consolidation, merger or sale
in question, but in no event higher than the closing price of
the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall
be computed with respect to a share of common stock issued by
the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may
elect; provided, further, that in the event that the
Substitute Common Stock is not listed on a national securities
exchange or the Nasdaq Stock Market, the term "Average Price"
shall mean the weighted average of the known sale prices per
share for shares of Substitute Common Stock within the one-
year period immediately preceding the consolidation, merger or
sale in question, taking into account the sale prices, if any,
for shares of Substitute Common Stock reported in the National
Association of Securities Dealers' Electronic Bulletin Board
Service or the National Quotation Bureau's "pink sheets"
during such one-year period.
(c) The Substitute Option shall have the same terms
as the Option, provided, that if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for
such number of shares of Substitute Common Stock as is equal to the
Assigned Value multiplied by the number of shares of Common Stock
for which the Option is then exercisable, divided by the Average
Price. The exercise price of the Substitute Option per share of
Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock for which the Option is then
exercisable and the denominator of which shall be the number of
shares of Substitute Common Stock for which the Substitute Option
is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the shares of common stock of the issuer of the
Substitute Option (the "Substitute Option Issuer") outstanding
prior to exercise of the Substitute Option. In the event that the
Substitute Option would be exercisable for more than 19.9% of the
shares of common stock of the Substitute Option Issuer outstanding
prior to exercise but for this clause (e), the Substitute Option
Issuer shall make a cash payment to Holder equal to the excess of
(i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute
Option after giving effect to the limitation in this clause (e).
This difference in value shall be determined by a nationally
recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the
Acquiring Corporation.
(f) Issuer shall not enter into any transaction
described in subsection (a) of this Section 8 unless the Acquiring
Corporation and any person that controls the Acquiring Corporation
assume in writing all the obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute
Option (the "Substitute Option Holder"), the Substitute Option
Issuer shall repurchase the Substitute Option from the Substitute
Option Holder at a price (the "Substitute Option Repurchase Price")
equal to (x) the amount by which (i) the Highest Closing Price (as
hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exercised
plus (y) Grantee's reasonable out-of-pocket expenses (to the extent
not previously reimbursed), and at the request of the owner (the
"Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase
the Substitute Shares at a price (the "Substitute Share Repurchase
Price") equal to (x) the Highest Closing Price multiplied by the
number of Substitute Shares so designated plus (y) Grantee's
reasonable Out-of-Pocket Expenses (to the extent not previously
reimbursed). The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within
the six-month period immediately preceding the date the Substitute
Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the
required repurchase of the Substitute Shares, as applicable;
provided, however, that in the event that the Substitute Common
Stock is not listed on a national securities exchange or the Nasdaq
Stock Market, the term "Highest Closing Price" shall mean the
highest known sale price for shares of Substitute Common Stock
within the six-month period immediately preceding the date that the
Substitute Option Holder gives notice of the required repurchase of
the Substitute Option or the Substitute Share Owner gives notice of
the required repurchase of the Substitute Shares, as applicable,
taking into account the sale prices, if any, for shares of
Substitute Common Stock reported in the National Association of
Securities Dealers' Electronic Bulletin Board Service or the
National Quotation Bureau's "pink sheets" during such six-month
period.
(b) The Substitute Option Holder and the Substitute
Share Owner, as the case may be, may exercise its respective right
to require the Substitute Option Issuer to repurchase the
Substitute Option and the Substitute Shares pursuant to this
Section 9 by surrendering for such purpose to the Substitute Option
Issuer, at its principal office, the agreement for such Substitute
Option (or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by a
written notice or notices stating that the Substitute Option Holder
or the Substitute Share Owner, as the case may be, elects to
require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the
provisions of this Section 9. As promptly as practicable, and in
any event within five business days after the surrender of the
Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered
to the Substitute Option Holder the Substitute Option Repurchase
Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or, in either case, the portion thereof
which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer
is prohibited under applicable law or regulation from repurchasing
the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer following a request for
repurchase pursuant to this Section 9 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to
the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Share Repurchase Price,
respectively, which it is no longer prohibited from delivering,
within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided, however, that
if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation from delivering to
the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its best efforts to receive all
required regulatory and legal approvals as promptly as practicable
in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of
repurchase of the Substitute Option or the Substitute Shares either
in whole or to the extent of the prohibition, whereupon, in the
latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner,
as appropriate, that portion of the Substitute Option Repurchase
Price or the Substitute Share Repurchase Price that the Substitute
Option Issuer is not prohibited from delivering; and (ii) deliver,
as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option
Holder to purchase that number of shares of the Substitute Common
Stock obtained by multiplying the number of shares of the
Substitute Common Stock for which the surrendered Substitute Option
was exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof theretofore delivered to
the Substitute Option Holder and the denominator of which is the
Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so
prohibited from repurchasing.
10. The 90-day period for exercise of certain rights
under Sections 2, 6, 7 and 13 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of
such rights, and for the expiration of all statutory waiting
periods; and (ii) to the extent necessary to avoid liability under
Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority
to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on
the part of Issuer are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action
to authorize and reserve and to permit it to issue, and at all
times from the date hereof through the termination of this
Agreement in accordance with its terms will have reserved for
issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock
at any time and from time to time issuable hereunder, and all such
shares, upon issuance pursuant hereto, will be duly authorized,
validly issued, fully paid, nonassessable, and will be delivered
free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(c) Neither the execution and delivery of this
Agreement by Issuer nor the consummation by Issuer of the
transactions contemplated hereby, nor compliance by Issuer with any
of the terms or provisions hereof, will (i) violate any provision
of the Restated Certificate of Incorporation or By-Laws of Issuer
or (ii) assuming that the consents and approvals referred to in
Section 4.5 of the Merger Agreement are duly obtained, (x) violate
any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to Issuer or any of the
Issuer Subsidiaries or any of their respective properties or
assets, or (y) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default
(or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a
right of termination or cancellation under, accelerate the
performance required by, or result in the creation of any Lien upon
any of the respective properties or assets of Issuer or any of the
Issuer Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to
which Issuer or any of the Issuer Subsidiaries is a party, or by
which they or any of their respective properties or assets may be
bound or affected.
12. Grantee hereby represents and warrants to Issuer
that:
(a) Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any
approvals or consents referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been
duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of
Common Stock or other securities acquired by Grantee upon exercise
of the Option will not be, acquired with a view to the public
distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from
registration under the Securities Act.
13. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option
created hereunder to any other person, without the express written
consent of the other party, except that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions
hereof, may assign in whole or in part its rights and obligations
hereunder within 90 days following such Subsequent Triggering Event
(or such later period as provided in Section 10); provided,
however, that until the date 15 days following the date on which
the Federal Reserve Board approves an application by Grantee under
the BHCA to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except
in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in
excess of 2% of the voting shares of Issuer, (iii) an assignment to
a single party (e.g., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal
Reserve Board.
14. Each of Grantee and Issuer will use its best efforts
to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation
of the transactions contemplated by this Agreement, including
without limitation making application to list or quote the shares
of Common Stock issuable hereunder on any stock exchange or
interdealer quotation system on which the Common Stock is listed or
quoted and applying to the Federal Reserve Board under the BHCA for
approval to acquire the shares issuable hereunder, but Grantee
shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder
until such time, if ever, as it deems appropriate to do so.
15. The parties hereto acknowledge that damages would be
an inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other
equitable relief.
16. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions and
covenants and restrictions contained in this Agreement shall remain
in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency
determines that the Holder is not permitted to acquire, or Issuer
is not permitted to repurchase pursuant to Section 7, the full
number of shares of Common Stock provided in Section 1(a) hereof
(as adjusted pursuant to Section 1(b) or 5 hereof), it is the
express intention of Issuer to allow the Holder to acquire or to
require Issuer to repurchase the greatest lesser number of shares
as may be permissible, without any amendment or modification
hereof.
17. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), mailed by registered or certified
mail (return receipt requested) or delivered by an express courier
(with confirmation) at the respective addresses of the parties set
forth in the Merger Agreement (or at such other address for a party
as shall be specified by like notice).
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, regardless of
the laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
19. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
20. Except as otherwise expressly provided herein, each
of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in
the Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings
with respect thereof, written or oral. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto,
and their respective successors except as assigns, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the
Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto
duly authorized, all as of the date first above written.
PREMIER FINANCIAL SERVICES,
INC.
By:/s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
President and Chief
Executive Officer
NORTHERN ILLINOIS FINANCIAL
CORPORATION
By:/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
President and Chief
Executive Officer
