EXHIBIT 4.1
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 14, 2000, between
SouthBanc Shares, Inc., a Delaware corporation ("Issuer"), and Heritage Bancorp,
Inc., a Delaware corporation ("Grantee").
W I T N E S S E T H:
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WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement"), which agreement
has been executed by the parties hereto immediately prior to this Stock Option
Agreement (this "Agreement");
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); and
WHEREAS, as a condition and inducement to Issuer's willingness
to enter into the Merger Agreement and this Agreement, Issuer has requested that
Grantee agree and Grantee has agreed, to grant Issuer an option to purchase
shares of Grantee's Common Stock on substantially the same terms as 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 614,733 fully paid and nonassessable shares of Issuer's Common Stock, par
value $0.01 per share ("Common Stock"), at a price of $17.50 per share (the
"Option Price"); provided, however, that in no event shall the number of shares
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of Common Stock for which this Option is exercisable exceed 19.9% of the
Issuer's issued and outstanding shares of Common Stock without giving effect to
any shares subject to or issued pursuant to the Option. The number of shares of
Common Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock
are either (i) issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement) or (ii) redeemed, repurchased,
retired or otherwise cease to be outstanding after the date of 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) and the Holder is not in
material beach of the agreements or covenants contained in this Agreement or the
Merger Agreement, provided that the Holder shall have sent the written notice of
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such exercise (as provided in subsection (e) of this Section 2) within 90 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
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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 Merger 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 6.1(e) of the Merger Agreement (unless the breach by
Issuer giving rise to such right of 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 6.1(e) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
non-volitional). Notwithstanding any other provision of this Agreement, in no
event shall any of Issuer's obligations under this Agreement continue six months
beyond an Exercise Termination Event. 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 (A) 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
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Commission (the "SEC")) of Issuer, (B) 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, (C) 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 (D) any substantially
similar transaction; provided, however, that in no event shall any
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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,
recommend or propose, 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 intent to withdraw or modify, in any manner adverse to Grantee, its
recommendation that the stockholders of Issuer approve the transactions
contemplated by the Merger Agreement 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 a proposal 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, the Office of
Thrift Supervision ("OTS") or any other federal or state bank
regulatory authority 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:
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(i) The acquisition by any person of beneficial
ownership of 25% or more of the then outstanding shares of Common
Stock; or
(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 (c) shall be 25%.
(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
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if prior notification to or approval of the Federal Reserve Board, 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
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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 may be endorsed with a restrictive legend that shall read
substantially as follows:
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"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy
of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under subsection (e) of
this Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder. Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued or treasury
shares of Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. ss. 18a and regulations promulgated
thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as
amended, the Change in Bank Control Act of 1978, as amended, or any other
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 information 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
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Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the rights of the
Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein include
any Stock Option Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of shares of Common Stock purchasable
upon the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as provided in this Section 5. In the event of any
change in, or distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in respect of the Common
Stock that would be prohibited under the terms of the Merger Agreement, or the
like, the type and number of shares of Common Stock purchasable upon exercise
hereof and the Option Price shall be appropriately adjusted in such manner as
shall fully preserve the economic benefits provided hereunder and proper
provision shall be made in any agreement governing any such transaction to
provide for such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee (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 90 days 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
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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,
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however, that after any such required reduction the number of Option Shares to
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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,
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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 customarily included in secondary offering
underwriting agreements for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies. Notwithstanding anything
to the contrary contained herein, in no event shall Issuer be obligated to
effect more than two registrations pursuant to this Section 6 by reason of the
fact that there shall be more than one Grantee as a result of any assignment or
division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase
Event (as defined below) and prior to twelve months thereafter, (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
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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 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 (i) 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 (ii) 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
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after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 7 is prohibited under applicable law or regulation from delivering to
the Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event
shall be deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase, lease or
other acquisition of all or a substantial
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portion of the assets of Issuer, other than any such transaction which would not
constitute an Acquisition Transaction pursuant to the provisos to Section
2(b)(i) hereof or (ii) upon the acquisition by any person of beneficial
ownership of 50% or more of the then outstanding shares of Common Stock,
provided that no such event shall constitute a Repurchase Event unless a
Subsequent Triggering Event shall have occurred prior to an Exercise Termination
Event. The parties hereto agree that Issuer's obligations to repurchase the
Option or Option Shares under this Section 7 shall not terminate upon the
occurrence of an Exercise Termination Event unless no Subsequent Triggering
Event shall have occurred prior to the occurrence of an Exercise Termination
Event.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate with or merge
into any person, other than Grantee or one of its Subsidiaries, and shall not be
the continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its Subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding voting shares
and voting share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or merger with
Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer
is the continuing or surviving person, and (iii) the transferee of all
or substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon exercise of
the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer
Price, as defined in Section 7.
(4) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in question,
but in no event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such consolidation, merger
or sale; provided that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to a share of
common stock issued by the person merging
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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
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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 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
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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.
(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,
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however, that if the Substitute Option Issuer is at any time after delivery of a
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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
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numerator of which is the Substitute Option Repurchase Price less the portion
thereof theretofore delivered to the Substitute Option Holder and the
denominator of which is the Substitute Option Repurchase Price, or (B) to the
Substitute Share Owner, a certificate for the Substitute Common Shares it is
then so prohibited from repurchasing.
10. The 90-day period for exercise of certain rights under
Sections 2, 6, 7 and 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:
(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.
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) Grantee may, at any time following a Repurchase Event
and prior to the occurrence of an Exercise Termination Event (or such later
period as provided in Section 10), relinquish the Option (together with any
Option Shares issued to and then owned by Grantee) to Issuer in exchange for a
cash fee equal to the Surrender Price (as defined below); provided, however,
-----------------
that Grantee may not exercise its rights pursuant to this Section 13 if Issuer
has repurchased the Option (or any portion thereof) or any Option Shares
pursuant to Section 7. The "Surrender Price" shall be equal to $1,600,000 (i)
plus, if applicable, Grantee's purchase price with respect to any Option Shares
and (ii) minus, if applicable, the sum of (A) the excess of (1) the net cash
amounts, if any, received by Grantee pursuant to the arms' length sale of Option
Shares (or any other securities into which such Option Shares were converted or
exchanged) to any unaffiliated party, over (2) Grantee's purchase price of such
Option Shares and (B) the net cash amounts, if any, received by Grantee pursuant
to an arms' length sale of a portion of the Option to any unaffiliated party.
(b) Grantee may exercise its right to relinquish the
Option and any Option Shares pursuant to this Section 13 by surrendering to
Issuer, at its principal office, this Agreement together with certificates for
Option Shares, if any, accompanied by a written notice stating (i) that Grantee
elects to relinquish the Option and Option Shares, if any, in accordance with
the provisions of this Section 13 and (ii) the Surrender Price. The Surrender
Price shall be payable in immediately available funds on or before the second
business day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
paying the Surrender Price to Grantee in full, Issuer shall immediately so
notify Grantee and thereafter deliver or cause to be delivered, from time to
time, to Grantee, the portion of the Surrender Price that it is no longer
prohibited from paying, 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 surrender pursuant to paragraph (b) of this Section 13
is prohibited under applicable law or regulation, or as a consequence of
administrative policy, from paying to Grantee the Surrender Price in full, (i)
Issuer shall (A) use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to make such payments, (B) within five days of the
submission or receipt of any documents relating to any such regulatory and legal
approvals, provide Grantee with copies of the same, and (C) keep Grantee advised
of both the status of any such request for regulatory and legal approvals, as
well as any discussions with any relevant regulatory or other third party
reasonably related to the same and (ii) Grantee may revoke such notice of
surrender by delivery of a notice of revocation to Issuer and, upon delivery of
such notice of revocation, the Exercise Termination Date shall be extended to a
date six months from the date on which the Exercise Termination Date would have
occurred if not for the provisions of this Section 13(c) (during which period
Grantee may exercise any of its rights hereunder, including any and all rights
pursuant to this Section 13).
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
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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 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 Nasdaq National
Market 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. (a) Notwithstanding any other provision of this Agreement,
in no event shall the Grantee's Total Profit (as hereinafter defined) exceed
$2,000,000 and, if it otherwise would exceed such amount, the Grantee, at its
sole election, shall either (i) reduce the number of shares of Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee, (iii) pay cash to the Issuer, or (iv)
any combination thereof, so that Grantee's actually realized Total Profit shall
not exceed $2,000,000 after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement,
this 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) of more than
$2,000,000; provided, that nothing in this sentence shall restrict any exercise
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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 of this Agreement, (ii)(x) the amount received by Grantee
pursuant to Issuer's repurchase of Option Shares pursuant to Section 7, less (y)
the 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 are converted or exchanged) to any
unaffiliated party, less (y) the 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.
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(d) As used herein, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee may propose to exercise this
Option shall be the Total Profit determined as of the date of such proposed
exercise assuming that this 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 Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
17. 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.
18. 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.
19. 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 Merger Agreement.
20. This Agreement shall be governed by and construed in
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.
21. 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.
22. 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.
23. 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
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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.
24. 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.
HERITAGE BANCORP, INC.
By: /s/ J. ▇▇▇▇▇▇ ▇▇▇▇▇
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J. ▇▇▇▇▇▇ ▇▇▇▇▇
President and Chief Executive Officer
SOUTHBANC SHARES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇
President and Chief Executive Officer
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