STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Option Agreement") dated
August 4, 1995, between MERCANTILE BANCORPORATION INC.
("Buyer"), a Missouri corporation registered as a bank hold-
ing company under the Bank Holding Company Act of 1956, as
amended (the "Holding Company Act"), and HAWKEYE BANCORPORA-
TION ("Seller"), an Iowa corporation registered as a bank
holding company under the Holding Company Act.
W I T N E S S E T H:
WHEREAS, the Executive Committee of the Board of
Directors of Buyer and the Board of Directors of Seller have
approved an Agreement and Plan of Reorganization dated as of
even date herewith (the "Merger Agreement") providing for the
merger of Seller with and into a wholly owned subsidiary of
Buyer;
WHEREAS, as a condition to Buyer's entering into
the Merger Agreement, Buyer has required that Seller agree,
and Seller has agreed, to grant to Buyer the option set forth
herein to purchase authorized but unissued shares of Seller
Common Stock;
NOW, THEREFORE, in consideration of the premises
herein contained, the parties agree as follows:
1. Definitions.
Capitalized terms used but not defined herein shall
have the same meanings as in the Merger Agreement.
2. Grant of Option.
Subject to the terms and conditions set forth
herein, Seller hereby grants to Buyer an option (the "Op-
tion") to purchase up to 2,678,000 authorized and unissued
shares of Seller Common Stock at a price of $22 per share
(the "Purchase Price") payable in cash as provided in Section
4 hereof.
3. Exercise of Option.
(a) Buyer may exercise the Option, in whole or in
part, at any time or from time to time if a Purchase Event
(as defined below) shall have occurred; provided, however,
that (i) to the extent the Option shall not have been exer-
cised, it shall terminate and be of no further force and ef-
fect upon the earliest to occur of the Effective Time of the
Merger and the termination of the Merger Agreement in ac-
cordance with Sections 7.01(a) through 7.01(c) thereof, pro-
vided that if such termination follows an Extension Event (as
defined below), the Option shall not terminate until the date
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that is 12 months following such termination; (ii) if the Op-
tion cannot be exercised on such day because of any injunc-
tion, order or similar restraint issued by a court of compe-
tent jurisdiction, the Option shall expire on the 30th busi-
ness day after such injunction, order or restraint shall have
been dissolved or when such injunction, order or restraint
shall have become permanent and no longer subject to appeal,
as the case may be; and (iii) that any such exercise shall be
subject to compliance with applicable law, including the
Holding Company Act.
(b) As used herein, a "Purchase Event" shall mean
any of the following events:
(i) Seller or any of its Subsidiaries, without
having received prior written consent from Buyer, shall
have entered into, authorized, recommended, proposed or
publicly announced its intention to enter into, autho-
rize, recommend, or propose, an agreement, arrangement
or understanding with any person (other than Buyer or
any of its Subsidiaries) to (A) effect a merger or con-
solidation or similar transaction involving Seller or
any of its Subsidiaries, (B) purchase, lease or other-
wise acquire 15% or more of the assets of Seller or any
of its Subsidiaries or (C) purchase or otherwise acquire
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(including by way of merger, consolidation, share ex-
change or similar transaction) Beneficial Ownership of
securities representing 10% or more of the voting power
of Seller or any of its Subsidiaries;
(ii) any person (other than Buyer or any Subsidiary
of Buyer, or Seller or any Subsidiary of Seller in a fi-
duciary capacity) shall have acquired Beneficial Owner-
ship or the right to acquire Beneficial Ownership of 10%
or more of the voting power of Seller; or
(iii) Seller's Board of Directors shall have with-
drawn or modified in a manner adverse to Buyer the rec-
ommendation of Seller's Board of Directors with respect
to the Merger Agreement, in each case after an Extension
Event; or
(iv) the holders of Seller Common Stock shall not
have approved the Merger Agreement at the Meeting, or
such Meeting shall not have been held or shall have been
cancelled prior to termination of the Merger Agreement
in accordance with its terms, in each case after an Ex-
tension Event.
(c) As used herein, the term "Extension Event"
shall mean any of the following events:
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(i) a Purchase Event of the type specified in
clauses (b)(i) and (b)(ii) above;
(ii) any person (other than Buyer or any of its
Subsidiaries) 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 with respect to, a tender offer or exchange offer to
purchase shares of Seller Common Stock such that, upon
consummation of such offer, such person would have Ben-
eficial Ownership (as defined below) or the right to ac-
quire Beneficial Ownership of 10% or more of the voting
power of Seller; or,
(iii) any person (other than Buyer or any Subsidiary
of Buyer, or Seller or any Subsidiary of Seller in a fi-
duciary capacity) shall have publicly announced its
willingness, or shall have publicly announced a pro-
posal, or publicly disclosed an intention to make a pro-
posal, (x) to make an offer described in clause (ii)
above or (y) to engage in a transaction described in
clause (i) above.
(d) As used herein, the terms "Beneficial Owner-
ship" and "Beneficially Own" shall have the meanings ascribed
to them in Rule 13d-3 under the Exchange Act.
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(e) In the event Buyer wishes to exercise the Op-
tion, it shall deliver to Seller a written notice (the date
of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it intends to pur-
chase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 60 calendar
days from the Notice Date for the closing of such purchase
(the "Closing Date").
4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3
hereof, Buyer shall pay to Seller the aggregate purchase
price for the shares of Seller Common Stock purchased pursu-
ant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by
Seller.
(b) At such closing, simultaneously with the de-
livery of cash as provided in Section 4(a), Seller shall de-
liver to Buyer a certificate or certificates representing the
number of shares of Seller Common Stock purchased by Buyer,
registered in the name of Buyer or a nominee designated in
writing by Buyer, and Buyer shall deliver to Seller a letter
agreeing that Buyer shall not offer to sell, pledge or other-
wise dispose of such shares in violation of applicable law or
the provisions of this Option Agreement.
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(c) If at the time of issuance of any Seller Com-
mon Stock pursuant to any exercise of the Option, Seller
shall have issued any share purchase rights or similar secu-
rities to holders of Seller Common Stock, then each such
share of Seller Common Stock shall also represent rights with
terms substantially the same as and at least as favorable to
Buyer as those issued to other holders of Seller Common
Stock.
(d) Certificates for Seller Common Stock delivered
at any closing hereunder shall be endorsed with a restrictive
legend which shall read substantially as follows:
The transfer of the shares represented by this cer-
tificate is subject to certain provisions of an
agreement between the registered holder hereof and
Hawkeye Bancorporation, a copy of which is on file
at the principal office of Hawkeye Bancorporation,
and to resale restrictions arising under the Secu-
rities Act of 1933 and any applicable state secu-
rities laws. A copy of such agreement will be
provided to the holder hereof without charge upon
receipt by Hawkeye Bancorporation of a written re-
quest therefor.
It is understood and agreed that the above legend shall be
removed by delivery of substitute certificate(s) without such
legend if Buyer shall have delivered to Seller an opinion of
counsel, in form and substance reasonably satisfactory to
Seller and its counsel, to the effect that such legend is not
required for purposes of the Securities Act and any ap-
plicable state securities laws.
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5. Authorization, etc.
(a) Seller hereby represents and warrants to Buyer
that:
(i) Seller has full corporate authority to execute
and deliver this Option Agreement and, subject to Sec-
tion 11(i), to consummate the transactions contemplated
hereby;
(ii) such execution, delivery and consummation have
been authorized by the Board of Directors of Seller, and
no other corporate proceedings are necessary therefor;
(iii) this Option Agreement has been duly and val-
idly executed and delivered and represents a valid and
legally binding obligation of Seller, enforceable
against Seller in accordance with its terms; and
(iv) Seller has taken all necessary corporate ac-
tion to authorize and reserve and, subject to Section
11(i), permit it to issue and, at all times from the
date hereof through the date of the exercise in full or
the expiration or termination of the Option, shall have
reserved for issuance upon exercise of the Option,
shares of Seller Common Stock, all of which,
upon issuance pursuant hereto, shall be duly authorized,
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validly issued, fully paid and nonassessable, and shall
be delivered free and clear of all claims, liens, encum-
brances, restrictions (other than federal and state se-
curities restrictions) and security interests and not
subject to any preemptive rights.
(b) Buyer hereby represents and warrants to Seller
that:
(i) Buyer has full corporate authority to execute
and deliver this Option Agreement and, subject to Sec-
tion 11(i), to consummate the transactions contemplated
hereby;
(ii) such execution, delivery and consummation have
been authorized by all requisite corporate action by
Buyer, and no other corporate proceedings are necessary
therefor;
(iii) this Option Agreement has been duly and val-
idly executed and delivered and represents a valid and
legally binding obligation of Buyer, enforceable against
Buyer in accordance with its terms; and
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(iv) any Seller Common Stock or other securities
acquired by Buyer upon exercise of the Option will not
be taken with a view to the public distribution thereof
and will not be transferred or otherwise disposed of ex-
cept in compliance with the Securities Act.
6. Adjustment upon Changes in Capitalization.
In the event of any change in Seller Common Stock
by reason of stock dividends, split-ups, recapitalizations or
the like, the type and number of shares subject to the Op-
tion, and the purchase price per share, as the case may be,
shall be adjusted appropriately. In the event that any addi-
tional shares of Seller Common Stock are issued after the
date of this Option Agreement (other than pursuant to an
event described in the preceding sentence or pursuant to this
Option Agreement), the number of shares of Seller Common
Stock subject to the Option shall be adjusted so that, after
such issuance, it equals at least 19.9% of the number of
shares of Seller Common Stock then issued and outstanding
(without considering any shares subject to or issued pursuant
to the Option).
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7. Repurchase.
(a) Subject to Section 11(i), at the request of
Buyer at any time commencing upon the occurrence of a Pur-
chase Event and ending 13 months immediately thereafter (the
"Repurchase Period"), Seller (or any successor entity
thereof) shall repurchase the Option from Buyer together with
all (but not less than all, subject to Section 10) shares of
Seller Common Stock purchased by Buyer pursuant thereto with
respect to which Buyer then has Beneficial Ownership, at a
price (per share, the "Per Share Repurchase Price") equal to
the sum of:
(i) The exercise price paid by Buyer for any
shares of Seller Common Stock acquired pursuant to the
Option;
(ii) The difference between (A) the "Market/Tender
Offer Price" for shares of Seller Common Stock (defined
as the higher of (x) the highest price per share at
which a tender or exchange offer has been made for
shares of Seller Common Stock or (y) the highest closing
mean of the "bid" and the "ask" price per share of
Seller Common Stock reported by NASDAQ, the automated
quotation system of the National Association of Securi-
ties Dealers, Inc., for any day within that portion of
the Repurchase Period which precedes the date Buyer
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gives notice of the required repurchase under this Sec-
tion 7) and (B) the exercise price as determined pursu-
ant to Section 2 hereof (subject to adjustment as pro-
vided in Section 6), multiplied by the number of shares
of Seller Common Stock with respect to which the Option
has not been exercised, but only if the Market/Tender
Offer Price is greater than such exercise price;
(iii) The difference between the Market/Tender Offer
Price and the exercise price paid by Buyer for any
shares of Seller Common Stock purchased pursuant to the
exercise of the Option, multiplied by the number of
shares so purchased, but only if the Market/Tender Offer
Price is greater than such exercise price; and
(iv) Buyer's reasonable out-of-pocket expenses in-
curred in connection with the transactions contemplated
by the Merger Agreement, including, without limitation,
legal, accounting and investment banking fees.
(b) In the event Buyer exercises its rights under
this Section 7, Seller shall, within 10 business days there-
after, pay the required amount to Buyer by wire transfer of
immediately available funds to an account designated by Buyer
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and Buyer shall surrender to Seller the Option and the cer-
tificates evidencing the shares of Seller Common Stock pur-
chased thereunder with respect to which Buyer then has Ben-
eficial Ownership, and Buyer shall warrant that it has sole
record and Beneficial Ownership of such shares and that the
same are free and clear of all liens, claims, charges, re-
strictions and encumbrances of any kind whatsoever.
(c) In determining the Market/Tender Offer Price,
the value of any consideration other than cash shall be de-
termined by an independent nationally recognized investment
banking firm selected by Buyer and reasonably acceptable to
Seller.
8. Repurchase at Option of Seller and First Re-
fusal.
(a) Except to the extent that Buyer shall have
previously exercised its rights under Section 7, at the re-
quest of Seller during the six-month period commencing 13
months following the first occurrence of a Purchase Event,
Seller may repurchase from Buyer, and Buyer shall sell to
Seller, all (but not less than all, subject to Section 10) of
the Seller Common Stock acquired by Buyer pursuant hereto and
with respect to which Buyer has Beneficial Ownership at the
time of such repurchase at a price per share equal to the
greater of (i) 110% of the Market/Tender Offer Price per
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share, (ii) the Per Share Repurchase Price or (iii) the sum
of (A) the aggregate Purchase Price of the shares so repur-
chased plus (B) interest on the aggregate Purchase Price
paid for the shares so repurchased from the date of purchase
to the date of repurchase at the highest rate of interest an-
nounced by Buyer as its prime or base lending or reference
rate during such period, less any dividends received on the
shares so repurchased, plus (C) Buyer's reasonable out-of-
pocket expenses incurred in connection with the transactions
contemplated by the Merger Agreement, including, without
limitation, legal, accounting and investment banking fees.
Any repurchase under this Section 8(a) shall be consummated
in accordance with Section 7(b).
(b) If, at any time after the occurrence of a Pur-
chase Event and prior to the earlier of (i) the expiration of
18 months immediately following such Purchase Event or (ii)
the expiration or termination of the Option, Buyer shall de-
sire to sell, assign, transfer or otherwise dispose of the
Option or all or any of the shares of Seller Common Stock ac-
quired by it pursuant to the Option, it shall give Seller
written notice of the proposed transaction (an "Offeror's No-
xxxx"), identifying the proposed transferee, and setting
forth the terms of the proposed transaction. An Offeror's
Notice shall be deemed an offer by Buyer to Seller, which may
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be accepted within 10 business days of the receipt of such
Offeror's Notice, on the same terms and conditions and at the
same price at which Buyer is proposing to transfer the Option
or such shares to a third party. The purchase of the Option
or any such shares by Seller shall be closed within 10 busi-
ness days of the date of the acceptance of the offer and the
purchase price shall be paid to Buyer by wire transfer of im-
mediately available funds to an account designated by Buyer.
In the event of the failure or refusal of Seller to purchase
the Option or all the shares covered by the Offeror's Notice
or if the Board or any other Regulatory Authority disapproves
Seller's proposed purchase of the Option or such shares,
Buyer may, within 60 days from the date of the Offeror's No-
xxxx, sell all, but not less than all, of the Option or such
shares to such third party at no less than the price speci-
fied and on terms no more favorable to the purchaser than
those set forth in the Offeror's Notice. The requirements of
this Section 8(b) shall not apply to (i) any disposition as a
result of which the proposed transferee would Beneficially
Own not more than 2% of the voting power of Seller or (ii)
any disposition of Seller Common Stock by a person to whom
Buyer has sold shares of Seller Common Stock issued upon ex-
ercise of the Option.
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9. Registration Rights.
At any time after a Purchase Event, Seller shall,
if requested by any holder or beneficial owner of shares of
Seller Common Stock issued upon exercise of the Option (ex-
cept any beneficial holder who acquired all of such holder's
shares in a transaction exempt from the requirements of Sec-
tion 8(b) by reason of clause (i) thereof) (each a "Holder"),
as expeditiously as possible file a registration statement on
a form for general use under the Securities Act if necessary
in order to permit the sale or other disposition of the
shares of Seller Common Stock that have been acquired upon
exercise of the Option in accordance with the intended method
of sale or other disposition requested by any such Holder (it
being understood and agreed that any such sale or other dis-
position 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 Seller
Common Stock then outstanding). Each such Holder shall pro-
vide all information reasonably requested by Seller for in-
clusion in any registration statement to be filed hereunder.
Seller shall use its best efforts to cause such registration
statement first to become effective and then to remain effec-
tive for such period not in excess of 180 days from the day
such registration statement first becomes effective as may be
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reasonably necessary to effect such sales or other disposi-
tions. The registration effected under this Section 9 shall
be at Seller's expense except for underwriting commissions
and the fees and disbursements of such Holders' counsel at-
tributable to the registration of such Seller Common Stock.
In no event shall Seller be required to effect more than one
registration hereunder. The filing of the registration
statement hereunder may be delayed for such period of time as
may reasonably be required to facilitate any public distribu-
tion by Seller of Seller Common Stock or if a special audit
of Seller would otherwise be required in connection there-
with. If requested by any such Holder in connection with
such registration, Seller shall become a party to any under-
writing agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of repre-
sentations, warranties, indemnities and other agreements cus-
tomarily included in such underwriting agreements for parties
similarly situated. Upon receiving any request for registra-
tion under this Section 9 from any Holder, Seller agrees to
send a copy thereof to any other person known to Seller to be
entitled to registration rights under this Section 9, in each
case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such
copies.
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10. Severability.
Any term, provision, covenant or restriction con-
tained in this Option Agreement held by a court or a Regula-
tory Authority of competent jurisdiction to be invalid, void
or unenforceable, shall be ineffective to the extent of such
invalidity, voidness or unenforceability, but neither the re-
maining terms, provisions, covenants or restrictions con-
tained in this Option Agreement nor the validity or enforce-
ability thereof in any other jurisdiction shall be affected
or impaired thereby. Any term, provision, covenant or re-
striction contained in this Option Agreement that is so found
to be so broad as to be unenforceable shall be interpreted to
be as broad as is enforceable. If for any reason such court
or Regulatory Authority determines that applicable law will
not permit Buyer or any other person to acquire, or Seller to
repurchase or purchase, the full number of shares of Seller
Common Stock provided in Section 2 hereof (as adjusted pursu-
ant to Section 6 hereof), it is the express intention of the
parties hereto to allow Buyer or such other person to ac-
quire, or Seller to repurchase or purchase, such lesser num-
ber of shares as may be permissible, without any amendment or
modification hereof.
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11. Miscellaneous.
(a) Expenses. Each of the parties hereto shall
pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, in-
cluding fees and expenses of its own financial consultants,
investment bankers, accountants and counsel, except as other-
wise provided herein.
(b) Entire Agreement. Except as otherwise ex-
pressly provided herein, this Option Agreement and the Merger
Agreement contain the entire agreement between the parties
with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with re-
spect thereto, written or oral.
(c) Successors; No Third Party Beneficiaries. The
terms and conditions of this Option Agreement shall inure to
the benefit of and be binding upon the parties hereto and
their respective successors and permitted assigns. Nothing
in this Option Agreement, expressed or implied, is intended
to confer upon any party, other than the parties hereto, and
their respective successors and assigns, any rights, reme-
dies, obligations, or liabilities under or by reason of this
Option Agreement, except as expressly provided herein.
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(d) Assignment. Other than as provided in Sec-
tions 8 and 9 hereof, neither of the parties hereto may sell,
transfer, assign or otherwise dispose of any of its rights or
obligations under this Option Agreement or the Option created
hereunder to any other person (whether by operation of law or
otherwise), without the express written consent of the other
party.
(e) Notices. All notices or other communications
which are required or permitted hereunder shall be in writing
and sufficient if delivered in accordance with Section 8.02
of the Merger Agreement (which is incorporated herein by ref-
erence).
(f) Counterparts. This Option Agreement may be
executed in counterparts, and each such counterpart shall be
deemed to be an original instrument, but both such counter-
parts together shall constitute but one agreement.
(g) Specific Performance. The parties hereto
agree that if for any reason Buyer or Seller shall have
failed to perform its obligations under this Option Agree-
ment, then either party hereto seeking to enforce this Option
Agreement against such non-performing party shall be entitled
to specific performance and injunctive and other equitable
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relief, and the parties hereto further agree to waive any re-
quirement for the securing or posting of any bond in connec-
tion with the obtaining of any such injunctive or other equi-
table relief. This provision is without prejudice to any
other rights that either party hereto may have against the
other party hereto for any failure to perform its obligations
under this Option Agreement.
(h) Governing Law. This Option Agreement shall be
governed by and construed in accordance with the laws of the
State of Missouri applicable to agreements made and entirely
to be performed within such state. Nothing in this Option
Agreement shall be construed to require any party (or any
subsidiary or affiliate of any party) to take any action or
fail to take any action in violation of applicable law, rule
or regulation.
(i) Regulatory Approvals; Section 16(b). If, in
connection with (A) the exercise of the Option under Sec-
tion 3 or a sale by Buyer to a third party under Section 8,
(B) a repurchase by Seller under Section 7 or a repurchase or
purchase by Seller under Section 8, prior notification to or
approval of the Board or any other Regulatory Authority is
required, then the required notice or application for ap-
proval shall be promptly filed and expeditiously processed
and periods of time that otherwise would run pursuant to such
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Sections shall run instead from the date on which any such
required notification period has expired or been terminated
or such approval has been obtained, and in either event, any
requisite waiting period shall have passed. In the case of
clause (A) of this subsection (i), such filing shall be made
by Buyer, and in the case of clause (B) of this subsection
(i), such filing shall be made by Seller, provided that each
of Buyer and Seller shall use its best efforts to make all
filings with, and to obtain consents of, all third parties
and Regulatory Authorities necessary to the consummation of
the transactions contemplated hereby, including without
limitation applying to the Board under the Holding Company
Act for approval to acquire the shares issuable hereunder.
Periods of time that otherwise would run pursuant to Sections
3, 7 or 8 shall also be extended to the extent necessary to
avoid liability under Section 16(b) of the Exchange Act.
(j) No Breach of Merger Agreement Authorized.
Nothing contained in this Option Agreement shall be deemed to
authorize Seller to issue any shares of Seller Common Stock
in breach of, or otherwise breach any of, the provisions of
the Merger Agreement.
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(k) Waiver and Amendment. Any provision of this
Agreement may be waived at any time by the party that is en-
titled to the benefits of such provision. This Option Agree-
ment 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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IN WITNESS WHEREOF, each of the parties hereto has
executed this Option Agreement as of the date first written
above.
MERCANTILE BANCORPORATION INC.
By: /s/ Xxxx X. Xxxx
Name: Xxxx X. Xxxx
Title: Executive Vice President
Mercantile Bank of St. Louis
National Association
HAWKEYE BANCORPORATION
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer,
Chief Operating Officer
& Chief Financial Officer
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