Exhibit 2.2
OPTION AGREEMENT
THE TRANSFER OF THE OPTION GRANTED BY THIS
AGREEMENT IS SUBJECT TO RESALE RESTRICTIONS.
OPTION AGREEMENT, dated as of October 7, 1996 (this "Agreement"),
between DS BANCOR, INC., a Delaware corporation ("Issuer"), and XXXXXXX
FINANCIAL CORPORATION, a Delaware corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger, dated as of October 7, 1996 (the "Plan"), which was executed by the
parties hereto prior to the execution of this Agreement; and
WHEREAS, as a condition and inducement to Grantee's entering into the
Plan and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Plan, the parties hereto
agree as follows:
SECTION 1. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 564,296 fully paid and non-assessable shares of Common Stock, par value $1.00
per share of Issuer ("Issuer Common Stock") (which number of shares is equal to
18.6% of the number of outstanding shares of Issuer Common Stock on the date
hereof), at a price per share equal to $36.50 (the "Initial Price"); provided,
however, that in the event Issuer issues or agrees to issue any additional
shares of Issuer Common Stock (other than shares issued upon the exercise of
options outstanding as of the date of the Plan in accordance with their terms
pursuant to existing stock option plans), or grants one or more options to
purchase additional shares of issuer common stock at a price less than the
Initial Price, as adjusted pursuant to Section 5(b) hereof, such price shall be
equal to such lesser price (such price, as adjusted, is hereinafter referred to
as the "Option Price"). The number of shares of Issuer Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
SECTION 2. (a) Grantee may exercise the Option, in whole or part, at
any time and from time to time following the occurrence of a Purchase Event (as
defined below); provided that the Option shall terminate and be of no further
force and effect upon the earliest to occur of the following events (which are
collectively referred to as an "Exercise Termination Event"):
(i) The time immediately prior to the Effective Time;
(ii) 12 months after the first occurrence of a Purchase
Event,
(iii) 18 months after the termination of the Plan
following the occurrence of a Preliminary Purchase Event (as defined
below), unless clause (vii) is applicable;
(iv) upon the termination of the Plan, prior to the
occurrence of a Purchase Event or Preliminary Purchase Event, by DS
Bancor pursuant to Section 8.1(h) of the Plan, both parties pursuant to
Section 8.1(a) of the Plan, by either party pursuant to Section 8.1(b)
or (c) of the Plan or
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Section 8.1(d) of the Plan based on any required vote of Grantee's
stockholders not being received, or by Issuer pursuant to Section
8.1(e) or (f) of the Plan;
(v) 135 days after the termination of the Plan, by
either party pursuant to Section 8.1(d) of the Plan based on the
required vote of Issuer's stockholders not being received, if no
Purchase Event or Preliminary Purchase Event has occurred prior to the
meeting of stockholders (or any adjournment or postponement thereof)
held to vote on the Plan;
(vi) nine months after the termination of the Plan, by
Grantee pursuant to Section 8.1(e) or (f) thereof as a result of a
breach by Issuer, unless such breach was willful or intentional; or
(vii) 24 months after the termination of the Plan, by
Grantee pursuant to Section 8.1(e) or (f) thereof as a result of a
willful or intentional breach by Issuer, or by Grantee pursuant to
Section 8.1(g) of the Plan.
(b) The term "Preliminary Purchase Event" shall mean any of
the following events or transactions occurring on or after the date hereof and
prior to an Exercise Termination Event:
(i) Issuer without having received Grantee's prior
written consent, shall have entered into any letter of intent or
definitive agreement to engage in an Acquisition Transaction (as
defined below) with any person (as defined below) other than Grantee or
any of its subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer shall have recommended that the shareholders of
Issuer approve or accept any Acquisition Transaction with any Person
(as the term "person" is defined in Section 3(a)9 and 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations thereunder) other than Grantee or any Grantee Subsidiary.
For purposes of this Agreement "Acquisition Transaction" shall mean (x)
a merger, consolidation or other business combination involving Issuer,
(y) a purchase, lease or other acquisition of all or substantially all
of the assets of Issuer, (z) a purchase or other acquisition (including
by way of merger. consolidation, share exchange or otherwise) of
Beneficial Ownership (as the term "beneficial ownership" is defined in
Regulation 13d-3(a) of the Exchange Act) of securities representing 15%
or more of the voting power of Issuer; provided, however that
"Acquisition Transaction" shall not include a transaction entered into
after the termination of the Plan in which the Issuer is the surviving
entity, if in connection with such transaction, no person acquires
Beneficial Ownership of 15 percent or more of the total voting power of
the Issuer to be outstanding after giving effect to such transaction
and in which the aggregate voting power of Issuer acquired by all
persons is less than 25 percent of the total voting power of Issuer;
(ii) Any Person (other than Grantee, any Grantee
Subsidiary or any current affiliate of Issuer) shall have acquired
Beneficial Ownership of 15% or more of the outstanding shares of Issuer
Common Stock;
(iii) (a) Any Person (other than Grantee or any
Grantee Subsidiary) shall have made a bona fide proposal to Issuer or,
by a public announcement or written communication that is or becomes
the subject of public disclosure, to Issuer's shareholders to engage in
an Acquisition Transaction (including, without limitation, any
situation in which any Person other than Grantee or any Grantee
Subsidiary shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filled a registration statement
under the Securities Act of 1933, as amended (the "Securities 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 have Beneficial Ownership of 15% 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))
(b) such bona fide proposal is not withdrawn or such public
announcement or written communication is not publicly withdrawn and (c)
stockholders of Issuer do not approve the Merger, as defined in the
Plan, at the Special Meeting, as defined in the Plan;
(iv) There shall exist a willful or intentional
breach under the Plan by Issuer and such breach would entitle Grantee
to terminate the Plan;
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(v) The special meeting of Issuers' shareholders held
for the purpose of voting on the Plan, shall not have been held or
shall have been canceled prior to termination of the Plan, or Issuer's
Board of Directors shall have failed to recommend, or shall have
withdrawn or modified in a manner adverse to Grantee the recommendation
of Issuer's Board of Directors, that Issuer's shareholders approve the
Plan, or if Issuer or Issuer's Board of Directors fails to oppose any
proposal by any Person (other than Grantee or any Grantee Subsidiary);
or
(vi) Any Person (other than Grantee or any Grantee
Subsidiary) shall have filed and have had accepted for processing (or
been deemed informationally complete) an application or notice with the
Office of Thrift Supervisor (the "OTS") the Federal Deposit Insurance
Corporation (the "FDIC"), the Connecticut Banking Commissioner (the
"Commissioner"), or other regulatory or administrative agency or
commission (each, a "Governmental Authority") for approval to engage in
an Acquisition Transaction.
(c) The term "Purchase Event" shall mean any of the following
events or transactions occurring on or after the date hereof and prior to an
Exercise Termination Event:
(i) The acquisition by any Person (other than Grantee
or any Grantee Subsidiary) of Beneficial Ownership (other than on
behalf of the Issuer) of 25% or more of the then outstanding Issuer
Common Stock; or
(ii) The occurrence of a Preliminary Purchase Event
described in Section 2(b)(i) except that the percentage referred to in
clause (z) thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Preliminary Purchase Event or Purchase Event known to Issuer;
provided, however, that the giving of such notice by Issuer shall not be a
condition to the right of Grantee to exercise the Option.
(e) In the event that Grantee is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the "Option
Notice" and the date of which being hereinafter referred to as the "Notice
Date") specifying (i) the total number of shares of Issuer Common Stock it will
purchase pursuant to such exercise and (ii) the time (which shall be on a
business day that is not less than three nor more than ten business days from
the Notice Date) on which the closing of such purchase shall take place (the
"Closing Date"); such closing to take place at the principal office of the
Issuer; provided, that, if prior notification to or approval of the OTS, the
FDIC, the Commissioner or any other Governmental Authority is required in
connection with such purchase (each, a "Notification" or an "Approval," as the
case may be), (a) Grantee shall promptly file the required notice or application
for approval ("Notice/Application"), (b) Grantee shall expeditiously process the
Notice/Application and (c) for the purpose of determining the Closing Date
pursuant to clause (ii) of this sentence, the period of time that otherwise
would run from the Notice Date shall instead run from the later of (x) in
connection with any Notification, the date on which any required notification
periods have expired or been terminated and (y) in connection with any Approval,
the date on which such approval has been obtained and any requisite waiting
period or periods shall have expired. For purposes of Section 2(a) hereof, any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. On or prior to the Closing Date, Grantee shall have the right to revoke
its exercise of the Option by written notice to the Issuer given not less than
three business days prior to the Closing Date.
(f) At the closing referred to in Section 2(e) hereof, Grantee
shall pay to Issuer the aggregate purchase price for the number of shares of
Issuer Common Stock specified in the Option Notice in immediately available
funds by wire transfer to a bank account designated by Issuer; provided,
however, that failure or refusal of Issuer to designate such a bank account
shall not preclude Grantee from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in Section 2(f) hereof, Issuer shall
deliver to Grantee a certificate or certificates representing the number of
shares of Issuer Common Stock specified in the Option Notice and, if the Option
should be exercised in part only, a new Option evidencing the rights of Grantee
thereof to purchase the balance of the shares of Issuer Common Stock purchasable
hereunder.
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(h) Certificates for Issuer Common Stock delivered at a
closing hereunder shall be endorsed with a restrictive legend substantially as
follows:
The transfer of the shares represented by this certificate is
subject to resale restrictions arising under the Securities Act of
1933, as amended, and applicable state securities laws and to certain
provisions of an agreement between DS Bancor, Inc., and Xxxxxxx
Financial Corporation, dated as of October 7, 1996. A copy of such
agreement is on file at the principal office of DS Bancor, Inc., and
will be provided to the holder hereof without charge upon receipt by DS
Bancor, Inc., of a written request therefor.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the Securities and Exchange
Commission (the "SEC") or Governmental Authority responsible for administering
any applicable state securities laws or an opinion of counsel, in form and
substance satisfactory to Issuer's counsel, to the effect that such legend is
not required for purposes of the Securities Act or applicable state securities
laws; (ii) the reference to the provisions of 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 Grantee to Issuer of an Option Notice
and the tender of the applicable purchase price in immediately available funds
on the Closing Date, unless prohibited by applicable law, Grantee shall be
deemed to be the holder of record of the number of shares of Issuer Common Stock
specified in the Option Notice, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Issuer Common Stock shall not then actually be delivered to Grantee. Issuer
shall pay all expenses and other charges that may be payable in connection with
the preparation, issuance and delivery of stock certificates under this Section
2 in the name of Grantee.
SECTION 3. Issuer agrees: (i) that it shall at all times until
the termination of this Agreement have reserved for issuance upon the exercise
of the Option that number of authorized and reserved shares of Issuer Common
Stock equal to the maximum number of shares of Issuer Common Stock at any time
and from time to time issuable hereunder, all of which shares will, upon
issuance pursuant hereto, be duly authorized, validly issued, fully paid,
non-assessable, and delivered free and clear of all claims, liens, encumbrances
and security interests and not subject to any preemptive rights; (ii) that it
will not, by amendment of its certificate of incorporation 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 reasonable action as may from
time to time be requested by the Grantee, at Grantee's expense (including (x)
complying with all premerger notification, reporting and waiting period
requirements specified in 15 U.S.C. ss. 18a and regulations promulgated
thereunder and (y)in the event prior approval of or notice to the OTS, the FDIC,
the Commissioner or any other Governmental Authority, under the Home Owners Loan
Act of 1933, as amended, the Change in Bank Control Act of 1978, as amended,
Section 36a-181 or Section 36a- 184, as applicable, of the Connecticut Bank
Holding Company Act, or any other applicable federal or state banking law, is
necessary before the Option may be exercised, cooperating with Grantee in
preparing such applications or notices and providing such information to each
such Governmental Authority as it may require in order to permit Grantee to
exercise the Option and Issuer duly and effectively to issue shares of Issuer
Common Stock pursuant hereto; and (iv) to take all action provided herein to
protect the rights of Grantee against dilution.
SECTION 4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein- in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any agreements and related options for which this Agreement (and the
Option granted hereby) may
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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.
SECTION 5. The number of shares of Issuer Common Stock
purchasable upon the exercise of the Option shall be subject to adjustment from
time to time as follows:
(a) In the event of any change in the type or number
of shares of Issuer Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares or other issuances of additional
shares (other than pursuant to the exercise of the Option), the type
and number of shares of Issuer Common Stock purchasable upon exercise
hereof shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Issuer Common
Stock are to be issued or otherwise become outstanding as a result of
any such change (other than pursuant to an exercise of the Option), the
number of shares of Issuer Common Stock that remain subject to the
Option shall be increased or decreased (as applicable) so that, after
such issuance and together with shares of Issuer Common Stock
previously issued pursuant to the exercise of the Option (as adjusted
on account of any of the foregoing changes in the Issuer Common Stock),
the Option shall equal 18.6% of the number of shares of Issuer Common
Stock then issued and outstanding.
(b) Whenever the number of shares of Issuer Common
Stock purchasable upon exercise hereof is adjusted as provided in this
Section 5, the Option Price shall be adjusted by multiplying the Option
Price by a fraction, the numerator of which shall be equal to the
number of shares of Issuer Common Stock purchasable prior to the
adjustment and the denominator of which shall be equal to the number of
shares of Issuer Common Stock purchasable after the adjustment.
SECTION 6. (a) Upon the occurrence of a Purchase Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee (whether on its own behalf or on behalf of any subsequent holder of the
Option (or part thereof) or of any of the shares of Issuer Common Stock issued
pursuant hereto), promptly prepare, file and keep current a shelf registration
statement under the Securities Act covering any shares issued and issuable
pursuant to the Option and shall use its reasonable best efforts to cause such
registration statement to become effective, and to remain current and effective
for a period not in excess of 180 days from the day such registration statement
first becomes effective, in order to permit the sale or other disposition of any
shares of Issuer Common Stock issued upon total or partial exercise of the
Option ("Option Shares") in accordance with any plan of disposition requested by
Grantee. Grantee shall have the right to demand one such registration which
right shall not be transferable except to an affiliate of Grantee. Grantee shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. In connection with any such
registration, Issuer and Grantee shall provide each other with representations,
warranties, indemnities and other agreements customarily given in connection
with such registration. If requested by Grantee in connection with such
registration, Issuer and Grantee shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating themselves in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements.
Notwithstanding the foregoing, if Grantee revokes any exercise notice or fails
to exercise any Option with respect to any exercise notice pursuant to Section
2(e) hereof, Issuer shall not be obligated to continue any registration process
with respect to the sale of Option Shares issuable upon the exercise of such
Option and Grantee shall not be deemed to have demanded registration of Option
Shares.
(b) In the event that Grantee requests Issuer to file a
registration statement following the failure to obtain any approval required to
exercise the Option as described in Section 9 hereof, the closing of the sale or
other disposition of the Issuer Common Stock or other securities pursuant to
such registration statement shall occur substantially simultaneously with the
exercise of the Option.
(c) Concurrently with the filing of a registration statement
under Section 6(a) hereof, Issuer shall also make all filings required to comply
with state securities laws in such number of states as Grantee may reasonably
request.
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SECTION 7. (a) Upon the occurrence of a Purchase Event that
occurs prior to an Exercise Termination Event, (i) at the request (the date of
such request being the "Option Repurchase Request Date") of Grantee, Issuer
shall repurchase, subject to compliance with applicable law and out of funds
legally available therefor, the Option from Grantee 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 the Option may then be exercised and (ii) at the request (the date of
such request being the "Option Share Repurchase Request Date") of the owner of
Option Shares from time to time (the "Owner"), 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 Issuer Common Stock
at which a tender offer or exchange offer therefor has been made after the date
hereof and on or prior to the Option Repurchase Request Date or the Option Share
Repurchase Request Date, as the case may be, (ii) the price per share of Issuer
Common Stock paid or to be paid by any third party pursuant to an agreement with
Issuer (whether by way of a merger, consolidation or otherwise), (iii) the
average of the 20 highest last sale prices for shares of Issuer Common Stock as
reported within the 90-day period ending on the Option Repurchase Request Date
or the Option Share Repurchase Request Date, as the case may be, and (iv) in the
event of a sale of all or substantially all 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 an investment banking firm selected
by Grantee or the Owner, as the case may be, and reasonably acceptable to
Issuer, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. In determining the market/offer price, the value of
consideration other than cash shall be the value determined by an investment
banking firm selected by Grantee or the Owner, as the case may be, and
reasonably acceptable to Issuer. The investment banking firm's determination
shall be conclusive and binding on all parties. For purposes of this Section 7,
Purchase Event shall have the true meaning as set forth in Section 2(c) hereof
except that in both subclause (i) and (ii) the applicable percentage of stock
shall be 50% rather than 25%.
(b) Grantee or the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and/or 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 Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within 30 business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to Grantee the Option Repurchase Price or to the Owner the
Option Share Repurchase Price.
(c) Issuer hereby undertakes to use its reasonable best
efforts to obtain all required regulatory, shareholder and legal approvals and
to file any required notices as promptly as practicable in order to accomplish
any repurchase contemplated by this Section 7. Nonetheless, to the extent that
Issuer is prohibited under applicable law or regulation, or as a consequence of
the provision as to "well capitalized" in Section 7(a) hereof, from repurchasing
any Option and/or any Option Shares in full, Issuer shall promptly so notify
Grantee and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to Grantee 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 Section
7(b) hereof is prohibited as referred to above, from delivering to Grantee
and/or the Owner, as appropriate, the Option Repurchase Price or the Option
Share Repurchase Price, respectively, in full, Grantee or the Owner, as
appropriate, may revoke its notice of repurchase of the Option or the Option
Shares either in whole or in part whereupon, in the case of a revocation in
part, Issuer shall promptly (i) deliver to Grantee and/or the Owner, as
appropriate. that portion of the Option Purchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering after taking into
account any such revocation and (ii) deliver, as appropriate, either (A) to
Grantee, a new Agreement evidencing the right of Grantee to purchase that number
of shares of Issuer Common Stock equal to the number of shares of Issuer Common
Stock purchasable immediately prior to the delivery of the notice of repurchase
less the number of shares of Issuer Common Stock covered by the portion of the
Option repurchased or, (B) to the Owner, a certificate for the number of Option
Shares covered by the revocation.
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(d) Issuer shall not enter into any agreement with any Person
(other than Grantee or a Grantee Subsidiary) for an Acquisition Transaction
unless the other Person assumes all the obligations of Issuer pursuant to this
Section 7 in the event that Grantee or the Owner elects, in its sole discretion,
to require such other Person to perform such obligations.
(e) Notwithstanding the foregoing provisions of this Section
7, Issuer shall not be required to deliver or cause to be delivered to Grantee
the Option Repurchase Price or to the Owner the Option Share Repurchase Price to
the extent that such delivery would prevent the Acquisition Transaction
described in Section 2(b)(1) from being accounted for as a "poolings of
interest," as determined by Issuer's independent accountants. Issuer shall
advise Grantee or the Owner within 15 business days after either Grantee or
Owner requests information from Issuer as to whether, and to the extent that,
Issuer intends to rely upon this Section 7(e) to preclude Grantee or Owner from
otherwise exercising their rights under this Section 7.
SECTION 8. (a) In the event that prior to an Exercise
Termination Event, Issuer shall enter into a letter of intent or definitive
agreement (i) to consolidate or merge with any Person (other than Grantee or a
Grantee Subsidiary), and Issuer shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any Person (other
than Grantee or a Grantee Subsidiary) 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 any other Person or cash or any other
property or the then outstanding shares of Issuer Common Stock 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 a Grantee
Subsidiary) then, and in each such case, such letter of intent or definitive
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of 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 (the Acquiring Corporation and any such controlling person being
hereinafter referred to as the "Substitute Option Issuer").
(b) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock (as is hereinafter defined) as is equal to
the market/offer price (as defined in Section 7 hereof) multiplied by the number
of shares of Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as hereinafter defined). The exercise
price of the Substitute Option per share of the Substitute Common Stock (the
"Substitute Purchase Price") shall then be equal to the Option Price multiplied
by a fraction in which the numerator is the number of shares of 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.
(c) The Substitute Option shall otherwise 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, provided, further that
the terms of the Substitute Option shall include (by way of example and not
limitation) provisions for the repurchase of the Substitute Option and
Substitute Common Stock by the Substitute Option Issuer on the same terms and
conditions as provided in Section 7 hereof.
(d) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or merger with
Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer
is the continuing or surviving corporation, and (iii) the transferee of
all or any substantial part of Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common
stock issued by the Substitute Option Issuer upon exercise of the
Substitute Option.
(iii) "Average Price" shall mean the average closing
price of a share of Substitute Common Stock for the one-year period
immediately preceding the consolidation, merger or sale in
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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
Issuer Common Stock issued by Issuer, the corporation merging into
Issuer or by any company which controls or is controlled by such
merging corporation, as Grantee may elect.
(e) 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 Substitute Common Stock outstanding immediately prior to the
issuance 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 (e), 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 (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 Grantee and the Substitute Option
Issuer. In addition, the provisions of Section 5(a) hereof shall not apply to
the issuance of any Substitute Option and for purposes of applying Section 5(a)
hereof thereafter to any Substitute Option the percentage referred to in Section
5(a) hereof shall thereafter equal the percentage that the percentage of the
shares of Substitute Common Stock subject to the Substitute Option bears to the
number of shares of Substitute Common Stock outstanding.
SECTION 9. Notwithstanding Sections 2, 6 and 7 hereof, if
Grantee has given the notice referred to in one or more of such Sections, the
exercise of the rights specified in any such Section shall be extended (a) if
the exercise of such rights requires obtaining regulatory approvals (including
any required waiting periods) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and (b) to the extent necessary to
avoid liability under Section 16(b) of the Exchange Act by reason of such
exercise; provided that in no event shall any closing date occur more than 12
months after the related notice date, and, if the closing date shall not have
occurred within such period due to the failure to obtain any required approval
by the OTS, the FDIC, the Commissioner or any other Governmental Authority
despite the best efforts of Issuer or the Substitute Option Issuer, as the case
may be, to obtain such approvals, the exercise of the rights shall be deemed to
have been rescinded as of the related notice date. In the event (a) Grantee
receives official notice that an approval of the OTS, the FDIC. the Commissioner
or any other Governmental Authority required for the purchase and sale of the
Option Shares will not be issued or granted or (b) a closing date has not
occurred within 12 months after the related notice date due to the failure to
obtain any such required approval, Grantee shall be entitled to exercise the
Option in connection with the concurrent resale of the Option Shares pursuant to
a registration statement as provided in Section 6 hereof. Nothing contained in
this Agreement shall restrict Grantee from specifying alternative means of
exercising rights pursuant to Sections 2,6 or 7 hereof in the event that the
exercising of any such rights shall not have occurred due to the failure to
obtain any required approval referred to in this Section 9.
SECTION 10. Issuer hereby represents and warrants to Grantee
as follows:
(a) Issuer has the requisite 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 approved 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 executed and
delivered by, and constitutes a valid and binding obligation of, Issuer,
enforceable against Issuer in accordance with its terms, subject to any required
Governmental Approval, and except as enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforcement of creditors' rights generally and except that
the availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought.
(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 Issuer Common Stock equal to the maximum number of shares of Issuer
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,
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fully paid, non-assessable, and will be delivered free and clear of all claims,
liens, encumbrances and security interests and not subject to any preemptive
rights.
SECTION 11. (a) Neither of the parties hereto may assign any
of its rights or delegate any of its obligations under this Agreement or the
Option created hereunder to any other Person without the express 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 Preliminary Purchase Event. The term
"Grantee" as used in this Agreement shall also be deemed to refer to Grantee's
permitted assigns.
(b) Any assignment of rights of Grantee to any permitted
assignee of Grantee hereunder shall bear the restrictive legend at the beginning
thereof substantially as follows:
The transfer of the option represented by this assignment and
the related option agreement is subject to resale restrictions arising
under the Securities Act of 1933, as amended, and applicable state
securities laws and to certain provisions of an agreement between DS
Bancor, Inc., and Xxxxxxx Financial Corporation dated as of October 7,
1996. A copy of such agreement is on file at the principal office of DS
Bancor, Inc., and will be provided to any permitted assignee of the
Option without charge upon receipt of a written request therefor.
SECTION 12. Each of Grantee and Issuer will use its reasonable
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, applying to the
OTS, the FDIC, the Commissioner and any other Governmental Authority for
approval to acquire the shares issuable hereunder.
SECTION 13. 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. 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.
SECTION 14. 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 Grantee is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7 hereof, the full number of shares
of Issuer Common Stock provided in Section 1(a) hereof (as adjusted pursuant
hereto), it is the express intention of Issuer to allow Grantee to acquire or to
require Issuer to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
SECTION 15. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable. telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Plan.
SECTION 16. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto shall be governed by
and construed in accordance with the laws of the State of Delaware (but not
including the choice of law rules thereof).
SECTION 17. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement and shall be effective at the time of
execution and delivery.
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SECTION 18. 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.
SECTION 19. Except as otherwise expressly provided herein or
in the Plan, 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.
SECTION 20. Capitalized terms used in this Agreement and not
defined herein but defined in the Plan shall have the meanings assigned thereto
in the Plan.
SECTION 21. Nothing contained in this Agreement shall be
deemed to authorize or require Issuer or Grantee to breach any provision of the
Plan or any provision of law applicable to the Grantee or Issuer.
SECTION 22. In the event that any selection or determination
is to be made by Grantee or the Owner hereunder and at the time of such
selection or determination there is more than one Grantee or Owner, such
selection shall be made by a majority in interest of such Grantees or Owners.
SECTION 23. In the event of any exercise of the option by
Grantee, Issuer and such Grantee shall execute and deliver all other documents
and instruments and take all other action that may be reasonably necessary in
order to consummate the transactions provided for by such exercise.
SECTION 24. Except to the extent Grantee exercises the Option,
Grantee shall have no rights to vote or receive dividends or have any other
rights as a shareholder with respect to shares of Issuer Common Stock covered
hereby.
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IN WITNESS WHEREOF, each of the parties has caused this Option
Agreement to be executed and delivered on its behalf by their officers thereunto
duly authorized, all as of the date first above written.
DS BANCOR, INC.,
By: /s/ Xxxxx X. XxXxxxx, Xx.
-------------------------------------
Xxxxx X. XxXxxxx, Xx.
President and Chief Executive Officer
XXXXXXX FINANCIAL CORPORATION
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Xxxxx X. Xxxxx, Chairman, President
and Chief Executive Officer
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