THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated February 4, 1998, between
Golden State Bancorp Inc., a Delaware corporation ("Issuer"), and First
Nationwide (Parent) Holdings Inc., a Delaware corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee, Issuer, First Nationwide Holdings Inc., a
Delaware corporation and a wholly owned subsidiary of Grantee ("FNH"), and
Golden State Financial Corporation, a Delaware corporation and a wholly owned
subsidiary of Issuer ("Merger Sub") have entered into an Agreement and Plan of
Reorganization of even date herewith (the"Reorganization Agreement"), and
Grantee and Issuer have entered into an Agreement and Plan of Merger of even
date herewith (together with the Reorganization Agreement, the "Merger
Agreement"), which agreements have been executed by the parties hereto
immediately prior to this Stock Option Agreement (this "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 10,165,950 fully paid and nonassessable shares of Issuer's Common Stock, par
value $1.00 per share ("Common Stock"), at a price of $24.00 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. Notwithstanding any other provision of this Agreement, Issuer and
Grantee agree that this Agreement shall not entitle Grantee to any LTWs (as
defined in the Reorganization Agreement) or any payment in respect thereof,
and, in the event Grantee becomes entitled to receive any shares of Common
Stock pursuant to the terms of this Agreement, Issuer may make such provisions
as are necessary to effectuate the provisions of this sentence.
(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
this Agreement, the number of shares of Common Stock subject to the Option
shall be increased or decreased, as appropriate, so that, after such issuance,
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 or Grantee 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 the written notice of such exercise (as provided in
subsection (e) of this Section 2) within ninety days following such Subsequent
Triggering Event (or such longer period as provided in Section 10), provided
further, however, that if the Option cannot be exercised on any day because of
any injunction, order or similar restraint issued by a court of competent
jurisdiction, the period during which the Option may be exercised shall be
extended so that the Option shall expire no earlier than on the tenth business
day after such injunction, order or restraint shall have been dissolved or when
such injunction, order or restraint shall have become permanent and no longer
subject to appeal, as the case may be. Each of the following shall be an
"Exercise Termination Event": (i) the Effective Time (as defined in the
Reorganization Agreement) of the Merger; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event except a termination by
Grantee pursuant to Section 8.1(f) of the Reorganization Agreement (unless the
breach by Issuer giving rise to such right of
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termination is non-volitional); or (iii) the passage of 12 months after
termination of the Merger Agreement if such termination follows the occurrence
of an Initial Triggering Event or is a termination by Grantee pursuant to
Section 8.1(f) of the Reorganization Agreement (unless the breach by Issuer
giving rise to such right of termination is non-volitional). 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 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 with any person other than Grantee
or a Subsidiary of Grantee. For purposes of this Agreement,
"Acquisition Transaction" shall mean (w) a merger or consolidation, or
any similar transaction, involving Issuer or any 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 10% or more of the voting power
of Issuer, or (z) any substantially similar transaction; provided,
however, that in no event shall any merger, consolidation, purchase or
similar transaction involving only the Issuer and one or more of its
Subsidiaries or involving only two or more of such Subsidiaries, be
deemed to be an Acquisition Transaction, provided that any such
transaction is not entered into in violation of the terms of the
Merger Agreement;
(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,
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recommend or propose, to engage in an Acquisition Transaction with any
person other than Grantee or a Grantee Subsidiary, or the Board of
Directors of Issuer shall have publicly withdrawn or modified, or
publicly announced its interest to withdraw or modify, in any manner
adverse to Grantee, its recommendation that the stockholders of Issuer
approve the transactions contemplated by the Merger Agreement in
anticipation of engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity in
the ordinary course of its business shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 10% or more
of the outstanding shares of Common Stock (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);
(iv) Any person other than 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 engage in an
Acquisition Transaction;
(v) After an overture is made by a third party 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 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 by any person of beneficial ownership
of 20% or more of the then outstanding shares of Common Stock;
or
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(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 the Office of Thrift Supervision (the "OTS") 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 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
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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
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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.
ss. 18a and regulations promulgated thereunder and (y) in the event, under any
federal or state banking law, prior approval of or notice to the Federal
Reserve Board, the OTS 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 in formation to the Federal
Reserve Board, the OTS 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
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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 (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) delivered within six months of such Subsequent Triggering
Event (or such longer period as provided in Section 10), promptly prepare, file
and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and
shall use its reasonable best efforts to cause such registration statement to
become effective and remain current 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 its reasonable best
efforts to cause such registration statement first to become effective and then
to remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. 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; 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 practicable 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 cus-
-8-
tomarily 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 longer 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 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 selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, 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 selected
by the Holder or Owner, as the case may be, and reasonably acceptable to
Issuer.
(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, this
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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 latter 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
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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.
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(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.
(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
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than
19.9% of the shares of Substitute Common Stock outstanding prior to exercise
but for this clause (e), the issuer of the Substitute Option (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
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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 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, 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 the Highest Closing Price multiplied by the number of
Substitute Shares so designated. 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.
(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.
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(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 or six-month period for exercise of certain
rights under Sections 2, 6, 7 and 14 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:
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(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) Issuer has taken all action (including if required
redeeming all of the Rights or amending or terminating the Rights Agreement) so
that the entering into of this Option Agreement, the acquisition of shares of
Common Stock hereunder and the other transactions contemplated hereby do not
and will not result in the grant of any rights to any person under the Rights
Agreement or enable or require the Rights to be exercised, distributed or
triggered.
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 1933 Act.
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13. (a) Notwithstanding anything to the contrary contained herein, in
no event shall Grantee's Total Profit (as defined below in Section 13(c)
hereof) exceed $25 million.
(b) Notwithstanding anything to the contrary contained
herein, the Option may not be exercised for a number of shares as would, as of
the date of exercise, result in a Notional Total Profit (as defined below in
Section 13(d) hereof) of more than $25 million; provided, that nothing in this
sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received by
Grantee pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 7 hereof, (ii) (x) the amount received by Grantee pursuant
to Issuer's repurchase of Option Shares pursuant to Section 7 hereof, less (y)
Grantee's purchase price for such Option Shares, (iii) (x) the net cash amounts
received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares shall be converted or exchanged) to
any unaffiliated party, less (y) Grantee's purchase price of such Option
Shares, (iv) any amounts received by Grantee on the transfer of the Option (or
any portion thereof) to any unaffiliated party, and (v) any equivalent amount
with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee may propose to exercise the
Option shall be the Total Profit determined as of the date of such proposed
exercise assuming that the Option were exercised on such date for such number
of shares and assuming that such shares, together with all other Option Shares
held by Grantee and its affiliates as of such date, were sold for cash at the
closing market price for the Issuer Common Stock as of the close of business on
the preceding trading day (less customary brokerage commissions).
14. Neither of the parties hereto may assign any of its
rights or obligations under this 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
longer period as provided in Section 10); provided, however, that until the
date 15 days following the date on which the Federal Reserve Board or the OTS,
as applicable, approves an application by Grantee to acquire the shares of
Common Stock subject to the Option, Grantee may not
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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 or the OTS, as
applicable.
15. 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 the shares of Common Stock issuable hereunder on the New York Stock
Exchange upon official notice of issuance and applying to the Federal Reserve
Board and/or the OTS, as applicable, 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.
16. 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.
17. 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 such lesser number of shares as may
be permissible, without any amendment or modification hereof.
18. 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 Reorganization Agreement.
19. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.
20. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
21. 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.
22. 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 and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
23. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
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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.
GOLDEN STATE BANCORP INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman, President and
Chief Executive Officer
FIRST NATIONWIDE (PARENT)
HOLDINGS INC.
By: /s/ Xxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: Vice Chairman
