Exhibit 4.1
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STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated June 1, 1998, between State Financial
Services Corporation, a Wisconsin corporation ("Grantee"), and Home Bancorp of
Elgin, Inc., a Delaware corporation ("Issuer").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger (the "Merger Agreement");
WHEREAS, as a condition and an inducement to Grantee's entering into
the Merger Agreement, Issuer is granting Grantee the Option (as hereinafter
defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement:
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 an
aggregate of 1,371,159 (as adjusted or set forth in Sections 1(b) and 5(b)
hereof) fully paid and nonassessable shares of the common stock, par value $0.01
per share, of Issuer ("Issuer Common Stock") at a price per share of $17.00 (the
"Option Price"); PROVIDED, HOWEVER, that in the event Issuer issues or agrees to
issue any shares of Issuer Common Stock (other than shares of Issuer Common
Stock issued pursuant to stock options granted pursuant to any director or
employee benefit or stock option plan prior to the date hereof) at a price less
than $17.00 (as adjusted pursuant to subsection (b) of Section 5 hereof), the
Option Price shall be equal to such lesser price; PROVIDED, FURTHER, that in no
event shall the number of shares for which this Option is exercisable exceed
19.9% of the issued and outstanding shares of Issuer Common Stock. The number of
shares of Issuer Common Stock that may be received upon the exercise of the
Option at Option Price are subject to adjustment as herein set forth.
b. In the event that any additional shares of Issuer Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Issuer Common Stock subject to the
Option shall be increased so that, after such issuance, such number together
with any shares of Issuer Common Stock previously issued pursuant hereto, equals
19.9% of the number of shares of Issuer 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
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authorize Issuer to issue shares of Issuer Common Stock in breach of any
provision of the Merger Agreement.
2. (a) Grantee may exercise the Option, in whole or part 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,
HOWEVER, that Grantee shall have sent the written notice of such exercise (as
provided in subsection (e) of this Section 2) within three (3) months following
such Subsequent Triggering Event (or such later period as provided in Section 10
hereof). Each of the following shall be an Exercise Termination Event: (i) the
Effective Time 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.l(f) of the Merger Agreement, or by Grantee or Issuer
pursuant to Section 8.1(d) of the Merger Agreement if prior to or within three
months after, the duly held meeting of the shareholders of the Issuer at which
the required vote to approve the Merger was not obtained it shall have been
publicly announced or disclosed that any person (other than Grantee or any
Grantee Subsidiary (as defined below)) shall have made, or disclosed an
intention to make, a proposal to engage in an Acquisition Transaction (as
defined below) (each, a "Listed Termination"); or (iii) the passage of twelve
(12) months (or such longer period as provided in Section 10) after termination
of the Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a Listed Termination. Notwithstanding anything to the
contrary contained herein, (i) the Option may not be exercised at any time when
Grantee shall be in material breach of any of its representations, warranties,
covenants or agreements contained in this Agreement or in the Merger Agreement
such that, in the case of the Merger Agreement, Issuer shall be entitled to
terminate the Merger Agreement pursuant to Section 8.l(e)(i) and (ii) thereof
and (ii) this Agreement shall automatically terminate upon the proper
termination of the Merger Agreement by Issuer either pursuant to Section 8.l(e)
thereof as a result of the material breach by Grantee of its covenants or
agreements contained in the Merger Agreement or pursuant to Section 8.l(g)
thereof. Notwithstanding the occurrence of an exercise Termination Event,
Grantee shall be entitled to purchase those shares of Issuer Common stock with
respect to which it has exercised the Option in accordance with the terms hereof
prior to the Exercise Termination event.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any subsidiary of Issuer (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 the subsidiaries of Grantee
(each a "Grantee Subsidiary") or the Board of Directors of
Issuer (the "Issuer Board") shall have
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recommended that the shareholders of Issuer approve or
accept any Acquisition Transaction other than the Merger (as
defined in the Merger Agreement). For purposes of this
Agreement, "Acquisition Transaction" shall mean either (x) a
merger or consolidation, or any similar transaction,
involving Issuer or Home Federal Savings and Loan
Association of Elgin (other than internal mergers,
consolidations or similar transactions involving solely
Issuer and/or one or more existing wholly-owned Issuer
Subsidiaries, PROVIDED, that any such transaction is not
entered into in violation of the terms of the Merger
Agreement), (y) a purchase, lease or other disposition of
15% or more of the consolidated assets, net revenues or net
income of Issuer (on a consolidated basis), or (z) an
issuance, sale or other disposition (including by way of
merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of
Issuer or Home Federal Savings and Loan Association of Elgin
(notwithstanding the foregoing, the beneficial ownership by
any current stockholders of Issuer of greater than 10% of
voting stock of Issuer as of the date of this Agreement
shall not constitute an Initial Triggering Event);
(ii) Any person (other than Grantee or any Grantee Subsidiary)
shall have acquired beneficial ownership (as such term is
defined in Rule I 3d-3 under the 0000 Xxx) or the right to
acquire beneficial ownership of, or any "group" (as such
term is defined under the 0000 Xxx) shall have been formed
which beneficially owns or has the right to acquire
beneficial ownership of, 20% or more of the then outstanding
shares of Issuer Common Stock (other than shares held in
accounts related to Issuer's employee benefit plans);
(iii) The shareholders of Issuer shall have voted and failed to
approve the Merger Agreement and the Merger at a meeting
which has been held for that purpose, or such meeting, in
violation of the Merger Agreement, shall not have been held,
or such meeting shall have been cancelled prior to
termination of the Merger Agreement if, in any event, prior
to such meeting (or if such meeting shall not have been held
or shall have been cancelled, prior to the termination of
the Merger Agreement), it shall have been publicly announced
or disclosed that any person (other than Grantee or any
Grantee Subsidiary) shall have made, or disclosed an
intention to make, a proposal to engage in an Acquisition
Transaction;
(iv) The Board of Directors of the Issuer shall have withdrawn or
modified (or publicly announced its intention to withdraw or
modify), in any manner adverse in any respect to Grantee,
its recommendation that the shareholders of Issuer approve
the transactions contemplated by the Merger Agreement, or
Issuer or any Issuer Subsidiary shall have authorized,
recommended, proposed (or publicly announced its intention
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to authorize, recommend or propose) an agreement to engage
in an Acquisition Transaction with any person other than
Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary
shall have made a proposal to Issuer or its shareholders to
engage in an Acquisition Transaction and such proposal shall
have been publicly announced;
(vi) Any person other than Grantee or any Grantee Subsidiary
shall have commenced (as such term is defined in Rule 17d-2
under the 1934 Act), or shall have filed with the SEC a
registration statement under the 1934 Act or tender offer
materials with respect to, a potential exchange offer or
tender offer to purchase any shares of Issuer Common Stock
such that, upon consummation of such offer, such person or a
"group" (as such term is defined under the 0000 Xxx) of
which such person is a member, would acquire beneficial
ownership (as such term is defined in Rule 13d-3 of the 1934
Act), or the right to acquire beneficial ownership, of 20%
or more of the then outstanding shares of Issuer Common
Stock:
(vii) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation
of and in order to facilitate engaging in an Acquisition
Transaction, and following such breach Grantee would be
entitle to terminate the Merger Agreement (whether
immediately or after the giving of notice or passage of time
or both); or
(viii) Any person other than Grantee or any Grantee Subsidiary
shall have filed an application or notice with the Board of
Governors of the Federal Reserve System (the "Federal
Reserve Board"), the Office of Thrift Supervision ("OTS"),
or other federal or state bank regulatory or antitrust
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 any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 30% or more
of the then outstanding shares of Issuer Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that
the percentage referred to in clause (z) of the second
sentence thereof shall be 30%.
(d) lssuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event") to the
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extent that such Triggering Event is known to the Issuer, it being understood
that the giving of such notice by Issuer shall not be a condition to the right
of Grantee to exercise the Option.
(e) In the event Grantee is entitled to and wishes to exercise the
Option (or any portion thereof), 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 30 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
PROVIDED, that if the closing of the purchase and sale pursuant to the Option
cannot be consummated by reason of any applicable judgment, decree, order, law
or regulation, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction or
consummation has expired or been terminated; and, PROVIDED, FURTHER, without
limiting the foregoing, that if prior notification to or approval of the Federal
Reserve Board, OTS or any other regulatory or antitrust authority is required in
connection with such purchase, Grantee shall promptly file the required notice
or application for approval, shall promptly notify Issuer of such filing (and
the Issuer shall fully cooperate with Grantee in the filing of any notice or
application and the obtaining of any such 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 in either event, 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,
Grantee shall (i) pay to Issuer the aggregate purchase price for the shares of
Issuer Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer and (ii) present and surrender this Agreement to Issuer at its principal
executive offices; PROVIDED, HOWEVER, that the failure or refusal of the Issuer
to designate such a bank account or accept surrender of this Agreement shall not
preclude Grantee 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 Grantee a certificate or certificates representing the number of
shares of Issuer Common Stock purchased by Grantee and, if the Option should be
exercised in part only, a new Option evidencing the rights of Grantee thereof to
purchase the balance of the shares purchasable hereunder.
(h) Certificates for lssuer Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. AS AMENDED, OR ANY STATE
SECURITIES LAWS OR BLUE SKY LAWS, AND MAY BE REOFFERED OR SOLD ONLY IF
SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
SUCH SECURITIES ARE ALSO
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SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE
STOCK OPTION AGREEMENT DATED JUNE 1, 1998, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER UPON REQUEST."
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 Grantee 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 1993 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the opinion of counsel to Grantee,
which opinion shall be reasonably satisfactory to Issuer; and (iii) the legend
shall be removed in its entirety if the conditions in the preceding clauses (i)
and (ii) are both satisfied. In addition, such certificates shall bear any other
legend as may be required by law.
(i) Upon the giving by Grantee to Issuer of 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
Issuer shall deliver to Grantee a certificate or certificates in definitive form
representing the shares of Issuer Common Stock issued upon such exercise, which
shares shall be free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever, and Grantee shall be deemed to be the holder of record of
such shares, notwithstanding that the stock transfer books of Issuer shall then
be closed. Issuer shall pay its out-of-pocket expenses payable in connection
with the preparation, issue and delivery of stock certificates under this
Section 2 in the name of Grantee or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive tights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer 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 applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under any state or
federal banking law, prior approval of or notice to the Federal Reserve Board,
OTS or to any state or other federal regulatory authority is necessary before
the Option may be exercised, cooperating fully with Grantee in preparing such
applications or notices and providing such information to the Federal Reserve
Board, OTS or such state or other federal regulatory authority as they may
require) in order to permit Grantee to exercise the Option and Issuer duly and
effectively to issue shares of
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Issuer Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of Grantee against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of Grantee, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling Grantee to purchase, on the
same terms and subject to the same conditions as are set forth therein, in the
aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any
Agreements and related Options for which this Agreement (and the Option granted
hereby) may 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 mutilated shall at any time be enforceable
by anyone.
5. In addition to the adjustment in the number of shares of Issuer
Common Stock that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of shares of Issuer 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.
(a) In the event of any change in, or distributions (other than the
payment of cash dividends in the ordinary course consistent with past practice)
in respect of, the Issuer Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions, conversions, exchanges
of shares or the like, the type and number of shares of Issuer Common Stock
purchasable upon exercise hereof shall be appropriately adjusted and proper
provision shall be made so that, in the event that any additional shares of
Issuer Common Stock are to be issued or otherwise become outstanding as a result
of any such change (other than pursuant to an exercise of the Option), the
number of shares of Issuer Common Stock that remain subject to the Option shall
be increased so that, after such issuance and together with shares of Issuer
Common Stock previously issued pursuant to the exercise of the Option (as
adjusted on account of any of the foregoing changes in the Issuer Common Stock),
it equals 19.9% of the number of shares of Issuer Common Stock then issued and
outstanding.
(b) Whenever the number of shares of Issuer Common Stock purchasable
upon exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Issuer Common Stock
purchasable prior to the adjustment and the denominator of which shall be equal
to the number of shares of Issuer Common Stock purchasable after the adjustment.
6.(a) Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event Grantee may, within twelve (12) months
(or such later period as provided in Section 10) of such Subsequent Triggering
Event, by written notice (the "Registration Notice") to Issuer request Issuer to
register under the 1933 Act all or any part of the shares of capital stock of
Issuer acquired by Grantee pursuant to this Agreement beneficially owned by
Grantee (the "Registrable Securities").
(b) Issuer shall thereupon have the option exercisable by written
notice delivered to Grantee within three (3) business days after the receipt of
the Registration Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities proposed to be so sold for cash at a price equal to the
product of (i) the number of Registrable Securities to be so purchased by the
Issuer and (ii) the Fair Market Value (as defined below) of a share of such
Registrable Securities. As used herein, the "Fair Market Value" of any share of
Registrable Securities shall be the average of the daily closing sales price for
a share of Issuer Common Stock on the Nasdaq National Market during the five (5)
trading days prior to the date on which the Registration Notice for such share
is received by Issuer.
(c) Any purchase of Registrable Securities by Issuer under Section 6(b)
shall take place at a closing to be held at the principal executive offices of
Issuer or at the offices of its counsel at any reasonable date and time
designated by Issuer in such notice with ten (10) business days after delivery
of such notice, and payment of the purchase price for the shares to be so
purchase shall be made by delivery at the time of such closing in immediately
available funds.
(d) If Issuer does not elect to exercise its option pursuant to this
Section 6 with respect to all Registrable Securities, it shall use its best
efforts to effect, as promptly as practicable, and keep current the registration
under the 1933 Act of the unpurchased Registrable Securities proposed to be
sold. Issuer will use its reasonable best efforts to cause such registration
statement promptly to become effective and then to remain effective for such
period not in excess of 120 days from the day such registration statement first
becomes effective or such shorter time as may be reasonably necessary to effect
the sale or other disposition of the Registrable Securities; PROVIDED, HOWEVER,
that
(i) Grantee shall not be entitled to demand more than one (1)
effective registration statements hereunder, and
(ii) Issuer will not be required to file any such registration
statement during any period of time (not to exceed 90 days
after such request in the case of clauses (A) and (B) below
or 120 days in the case of clause (C) below) when
(A) Issuer is in possession of material non-public
information which it reasonably believes would be
detrimental to be disclosed at such time and, in the
opinion of counsel to Issuer, such information
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would be required to be disclosed if a registration
statement were filed at that time;
(B) Issuer is required under the 1933 Act to include audited
financial statements for any period in such registration
statement and such financial statements are not yet
available for inclusion in such registration statement;
or
(C) Issuer determines, in its reasonable judgment, that such
registration would interfere with any financing,
acquisition or other material transaction involving
Issuer or any of its affiliates.
(e) Issuer shall use its reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 6 to be qualified for
sale under the securities or "blue sky" laws of such jurisdictions as Grantee
may reasonably request and shall continue such registration or qualification in
effect in such jurisdiction; PROVIDED, HOWEVER, that Issuer shall not be
required to qualify to do business in, or consent to general service of process
in, any jurisdiction by reason of this provision.
(f) The registration rights set forth in this Section 6 are subject to
the condition that Grantee shall provide Issuer with such information with
respect to the Registrable securities, the plans for the distribution thereof,
and such other information with respect to such holder as, in the reasonable
judgment of counsel for Issuer, is necessary to enable Issuer to include in such
registration statement all material facts required to be disclosed with respect
to a registration thereunder.
(g) A registration effected under this Section 6 shall be effected at
Issuer's expense, except for underwriting discounts and commissions, broker's
fees and the fees and the expenses of counsel and other advisors to Grantee.
(h) In connection with any registration effected under this Section 6,
the parties agree
(i) to indemnify each other in the customary manner, and
(ii) to take all reasonable further actions which shall be
reasonably necessary to effect such registration and sale.
(i) If Issuer Common Stock or any other securities to be acquired upon
exercise of the Option are then listed on the Nasdaq National Market or a
national securities exchange, Issuer, upon the request of Grantee, will promptly
file an application to list the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on the Nasdaq National
Market or a national securities exchange, as the case may be, and will its best
efforts to obtain approval of such listing as soon as practicable.
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7. (a) At any time after the occurrence of a Repurchase Event (as
defined below), (i) at the request of Grantee, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from Grantee at a price (the
"Option Repurchase Price") equal to the amount by which (A) the market/offer
price (as defined below) exceeds (B) the Option Price, multiplied by the number
of shares for which this Option may then be exercised and (ii) at the request of
Grantee delivered prior to an Exercise Termination Event (or such later period
as provided in Section 10), Issuer (or any successor thereto) shall repurchase
such number of the Option Shares from Grantee as Grantee shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Issuer Common Stock
at which a tender or exchange offer therefor has been made, (ii) the price per
share of Issuer Common Stock to be paid by any third party pursuant to an
agreement with Issuer, (iii) the highest closing price for shares of Issuer
Common Stock within the six-month period immediately preceding the date Grantee
gives notice of the required repurchase of this Option or Grantee 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 any substantial part of Issuer's assets or deposits,
the sum of the net price paid in such sale for such assets or deposits and the
current market value of the remaining net assets of Issuer as determined by a
nationally recognized investment banking firm selected by Grantee and reasonably
acceptable to Issuer, divided by the number of shares of Issuer 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 Grantee and reasonably
acceptable to Issuer.
(b) Grantee may exercise its right to require Issuer to repurchase the
Option and any Option Shares pursuant to this Section 7 by surrendering for such
purpose to Issuer, at its principal office, a copy of this Agreement or
certificates for Option Shares, as applicable, accompanied by a written notice
or notices stating that Grantee elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within 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, Issuer shall
deliver or cause to be delivered to Grantee the Option Repurchase Price and/or
to Grantee 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, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares 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 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, or as a
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consequence of administrative policy, from delivering to Grantee the Option
Repurchase Price and the Option Share Repurchase Price in full (and Issuer
hereby undertakes to 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 accomplish such repurchase), Grantee may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to Grantee that portion of the Option Repurchase Price
and/or the Option Shares Repurchase Price that Issuer is not prohibited from
delivering; and (ii) deliver to Grantee either (A) a new Agreement evidencing
the right of Grantee to purchase that number of shares of Issuer Common Stock
obtained by multiplying the number of shares of Issuer Common Stock for which
the surrendered 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 Grantee and the
denominator of which is the Option Repurchase Price, and/or (B) a certificate
for the Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by Issuer
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date. Grantee shall nonetheless have the right to exercise the Option
until the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be
deemed to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 50% or more
of the then outstanding Issuer Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred
to in clause (z) shall be 50%.
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 a Grantee Subsidiary), or engage in a plan of exchange
with any person (other than Grantee or a Grantee Subsidiary) and Issuer shall
not be the continuing or surviving corporation of such consolidation or merger
or the acquirer in such plan of exchange, (ii) to permit any person, other
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than Grantee or a Grantee Subsidiary, to merge into Issuer or be acquired by
Issuer in a plan of exchange and Issuer shall be the continuing or surviving or
acquiring corporation, but, in connection with such merger or plan of exchange,
the then outstanding shares of Issuer Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any other
property or the then outstanding shares of Issuer Common Stock shall after such
merger or plan or exchange represent less than 50% of the outstanding shares and
share equivalents of the merged or acquiring company, or (iii) to sell or
otherwise transfer all or a substantial part of its or an Issuer Subsidiary's
assets or deposits to any person, other than Grantee or a Grantee Subsidiary,
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
Grantee, 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:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer
(if other than Issuer), (ii) the acquiring person in a plan
of exchange in which Issuer is acquired, (iii) the Issuer in
a merger or plan of exchange in which Issuer is the
continuing or surviving or acquiring person. and (iv) the
transferee of all or a substantial part of Issuer's assets
or deposits (or the assets or deposits of the Issuer
Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued
by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for one year
immediately preceding the consolidation, merger or sale
referred to in Section 8(a), 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 Grantee may elect.
(v) "Person" as used in this Agreement shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange
Act.
(c) The Substitute Option shall have the same terms as the Option:
PROVIDED, that the exercise price therefor and number of shares subject thereto
shall be as set forth in this Section 8; PROVIDED, FURTHER, that the Substitute
Option shall be exercisable immediately upon issuance without the occurrence of
a Triggering Event; and PROVIDED, FURTHER, that if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option. such terms shall be
as similar as possible and in no event less advantageous to Grantee. The issuer
of the Substitute Option shall also enter into an agreement with Grantee in
substantially the same form as this Agreement (subject to the variations
described in the foregoing provisos), which agreement shall be applicable to the
Substitute Option.
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(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 Issuer Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence of
Section 8(a), divided by the Average Price, rounded up to the nearest whole
share. 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 Issuer Common Stock for
which the Option was exercisable immediately prior to the event described in the
first sentence of Section 8(a) 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
Section 8(e), the issuer of the Substitute Option (the "Substitute Option
Issuer") shall make a cash payment to Grantee equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in this
Section 8(e) over (ii) the value of the Substitute Option after giving effect to
the limitation in this Section 8(e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by
Grantee.
(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 and take all other actions that may be necessary so that the
provisions of this Section 8 are given full force and effect (including, without
limitation, any action that may be necessary so that the holders of the other
shares of common stock issued by Substitute Option Issuer are not entitled to
exercise any rights by reason of the issuance of exercise of the Substitute
Option and the shares of Substitute Common Stock are otherwise in no way
distinguishable from or have lesser economic value than other share of common
stock issued by Substitute Option Issuer (other than any diminution in value
resulting from the fact that the shares of Substitute Common Stock are
restricted securities, as defined in Rule 144 under the 1934 Act or any
successor provision)).
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
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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 Substitute Share Owner, as the
case may be, may exercise its respective rights 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/or 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 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, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer 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 Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) 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, or as a consequence of
administrative policy, 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 reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/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 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
14
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, and/or (B) to the Substitute Share Owner, a
certificate for the Substitute Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior to the
date of the notice by the Substitute Option Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such date,
the Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day period.
10. The 30-day, 3-month, 6-month, or 12-month periods for exercise of
certain rights under Sections 2, 6, 7 and 9 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights
(for so long as Grantee. Substitute Option Holder or Substitute Share owner, as
the case may be, is using commercially reasonable efforts to obtain such
regulatory approvals), 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. (a) Issuer hereby represents and warrants to Grantee as follows:
(i) 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 Issuer Board prior to the date hereof and no other
corporate proceedings on the part of the 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.
(ii) Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from
the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance
upon the exercise of the Option, that number of shares of
Issuer Common Stock equal to the maximum number of shares of
Issuer Common Stock at any time and from time to time
issuable hereunder, and all such shares, upon issuance
pursuant thereto, 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.
(b) Grantee hereby represents and warrants to Issuer as follows:
(i) Grantee has corporate power and authority to execute and
deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by
Grantee and the performance of its
15
obligations hereunder by Grantee have been duly and validly
authorized by the Board of Directors of Grantee and no other
corporate proceedings on the part of grantee are necessary
to authorize this Agreement or for Grantee to perform its
obligations hereunder. This Agreement has been duly and
validly executed and delivered by Grantee.
(i) Any Option Shares acquired upon exercise of this Option by
Grantee will be acquired for Grantee's own account and for
investment purposes only. This Option is not being, and any
Option Shares 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.
12. 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. Certificates
representing shares sold in a registered public offering pursuant to Section 9
shall not be required to bear the legend set forth in Section 2(h).
13. Each of Grantee and Issuer will use its reasonable 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, applying to the
Federal Reserve Board and OTS 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 Issuer Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
14. 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, this being in addition to any
other remedy to which they are entitled at law or in equity. In connection
therewith both parties waive the posing of any bond or similar requirement.
15. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that Grantee is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Issuer Common
Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or
Section 5 hereof), it is the express intention of Issuer to allow Grantee to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
16
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
17. This Agreement shall be governed by and construed in accordance
with the laws of the State of Wisconsin, without regard to the conflict of law
principles thereof.
18. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
19. 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.
20. 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 assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
21. Each party shall execute and deliver such other documents and
instruments and take such further action that may be necessary in order to
consummate the transactions contemplated hereby.
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22. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
HOME BANCORP OF ELGIN, INC.
By:
---------------------------
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
STATE FINANCIAL SERVICES CORPORATION
By:
---------------------------
Xxxxxxx X. Xxxxx
President and Chief Executive Officer
