Exhibit 2.2
OPTION AGREEMENT
THE TRANSFER OF THE OPTION GRANTED
BY THIS AGREEMENT IS SUBJECT TO RESALE RESTRICTIONS.
OPTION AGREEMENT, dated as of October 7, 1996 (this "Agreement"), between
DS BANCOR, INC., a Delaware corporation ("Issuer"), and XXXXXXX FINANCIAL
CORPORATION, a Delaware corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger, dated as of October 7, 1996 (the "Plan"), which was executed by the
parties hereto prior to the execution of this Agreement; and
WHEREAS, as a condition and inducement to Grantee's entering into the Plan
and in consideration therefor, Issuer has agreed to grant Grantee the Option (as
defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Plan, the parties hereto agree as
follows:
SECTION 1. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 564,296 fully paid and non-assessable shares of Common Stock, par value $1.00
per share of Issuer ("Issuer Common Stock") (which number of shares is equal to
18.6% of the number of outstanding shares of Issuer Common Stock on the date
hereof), at a price per share equal to $36.50 (the "Initial Price"); PROVIDED,
HOWEVER, that in the event Issuer issues or agrees to issue any additional
shares of Issuer Common Stock (other than shares issued upon the exercise of
options outstanding as of the date of the Plan in accordance with their terms
pursuant to existing stock option plans), or grants one or more options to
purchase additional shares of issuer common stock at a price less than the
Initial Price, as adjusted pursuant to Section 5(b) hereof, such price shall be
equal to such lesser price (such price, as adjusted, is hereinafter referred to
as the "Option Price"). The number of shares of Issuer Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
SECTION 2. (a) Grantee may exercise the Option, in whole or part, at
any time and from time to time following the occurrence of a Purchase Event (as
defined below); provided that the Option shall terminate and be of no further
force and effect upon the earliest to occur of the following events (which are
collectively referred to as an "Exercise Termination Event"):
(i) The time immediately prior to the Effective Time;
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(ii) 12 months after the first occurrence of a Purchase
Event,
(iii) 18 months after the termination of the Plan following
the occurrence of a Preliminary Purchase Event (as defined below), unless
clause (vii) is applicable;
(iv) upon the termination of the Plan, prior to the
occurrence of a Purchase Event or Preliminary Purchase Event, by DS Bancor
pursuant to Section 8.1(h) of the Plan, both parties pursuant to Section
8.1(a) of the Plan, by either party pursuant to Section 8.1(b) or (c) of
the Plan or Section 8.1(d) of the Plan based on any required vote of
Grantee's stockholders not being received, or by Issuer pursuant to Section
8.1(e) or (f) of the Plan;
(v) 135 days after the termination of the Plan, by either
party pursuant to Section 8.1(d) of the Plan based on the required vote of
Issuer's stockholders not being received, if no Purchase Event or
Preliminary Purchase Event has occurred prior to the meeting of
stockholders (or any adjournment or postponement thereof) held to vote on
the Plan;
(vi) nine months after the termination of the Plan, by
Grantee pursuant to Section 8.1(e) or (f) thereof as a result of a breach
by Issuer, unless such breach was willful or intentional; or
(vii) 24 months after the termination of the Plan, by Grantee
pursuant to Section 8.1(e) or (f) thereof as a result of a willful or
intentional breach by Issuer, or by Grantee pursuant to Section 8.1(g) of
the Plan.
(b) The term "Preliminary Purchase Event" shall mean any of
the following events or transactions occurring on or after the date hereof and
prior to an Exercise Termination Event:
(i) Issuer without having received Grantee's prior written
consent, shall have entered into any letter of intent or definitive
agreement to engage in an Acquisition Transaction (as defined below) with
any person (as defined below) other than Grantee or any of its subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer shall
have recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction with any Person (as the term "person" is defined in
Section 3(a)9 and 13(d)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules and regulations thereunder) other than
Grantee or any Grantee Subsidiary. For purposes of this Agreement
"Acquisition Transaction" shall mean (x) a merger, consolidation or other
business combination involving Issuer, (y) a purchase, lease or other
acquisition of all or substantially all of the assets of Issuer, (z) a
purchase or other acquisition (including by way of merger. consolidation,
share exchange or otherwise) of Beneficial Ownership (as the term
"beneficial ownership" is defined in Regulation 13d-3(a) of the Exchange
Act) of securities representing 15% or more of the voting power of Issuer;
provided, however that "Acquisition Transaction" shall not
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include a transaction entered into after the termination of the Plan in
which the Issuer is the surviving entity, if in connection with such
transaction, no person acquires Beneficial Ownership of 15 percent or more
of the total voting power of the Issuer to be outstanding after giving
effect to such transaction and in which the aggregate voting power of
Issuer acquired by all persons is less than 25 percent of the total voting
power of Issuer;
(ii) Any Person (other than Grantee, any Grantee Subsidiary or
any current affiliate of Issuer) shall have acquired Beneficial Ownership
of 15% or more of the outstanding shares of Issuer Common Stock;
(iii) (a) Any Person (other than Grantee or any Grantee
Subsidiary) shall have made a BONA FIDE proposal to Issuer or, by a public
announcement or written communication that is or becomes the subject of
public disclosure, to Issuer's shareholders to engage in an Acquisition
Transaction (including, without limitation, any situation in which any
Person other than Grantee or any Grantee Subsidiary shall have commenced
(as such term is defined in Rule 14d-2 under the Exchange Act), or shall
have filled a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would have Beneficial Ownership of
15% or more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" or an "Exchange Offer",
respectively)) (b) such bona fide proposal is not withdrawn or such public
announcement or written communication is not publicly withdrawn and (c)
stockholders of Issuer do not approve the Merger, as defined in the Plan,
at the Special Meeting, as defined in the Plan;
(iv) There shall exist a willful or intentional breach under the
Plan by Issuer and such breach would entitle Grantee to terminate the Plan;
(v) The special meeting of Issuers' shareholders held for the
purpose of voting on the Plan, shall not have been held or shall have been
canceled prior to termination of the Plan, or Issuer's Board of Directors
shall have failed to recommend, or shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's Board of
Directors, that Issuer's shareholders approve the Plan, or if Issuer or
Issuer's Board of Directors fails to oppose any proposal by any Person
(other than Grantee or any Grantee Subsidiary); or
(vi) Any Person (other than Grantee or any Grantee Subsidiary)
shall have filed and have had accepted for processing (or been deemed
informationally complete) an application or notice with the Office of
Thrift Supervisor (the "OTS") the Federal Deposit Insurance Corporation
(the "FDIC"), the Connecticut Banking Commissioner (the "Commissioner"), or
other regulatory or administrative agency or commission (each, a
"Governmental Authority") for approval to engage in an Acquisition
Transaction.
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(c) The term "Purchase Event" shall mean any of the
following events or transactions occurring on or after the date hereof and prior
to an Exercise Termination Event:
(i) The acquisition by any Person (other than Grantee or
any Grantee Subsidiary) of Beneficial Ownership (other than on behalf of
the Issuer) of 25% or more of the then outstanding Issuer Common Stock; or
(ii) The occurrence of a Preliminary Purchase Event
described in Section 2(b)(i) except that the percentage referred to in
clause (z) thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Preliminary Purchase Event or Purchase Event known to Issuer;
PROVIDED, HOWEVER, that the giving of such notice by Issuer shall not be a
condition to the right of Grantee to exercise the Option.
(e) In the event that Grantee is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the "Option
Notice" and the date of which being hereinafter referred to as the "Notice
Date") specifying (i) the total number of shares of Issuer Common Stock it will
purchase pursuant to such exercise and (ii) the time (which shall be on a
business day that is not less than three nor more than ten business days from
the Notice Date) on which the closing of such purchase shall take place (the
"Closing Date"); such closing to take place at the principal office of the
Issuer; PROVIDED, THAT, if prior notification to or approval of the OTS, the
FDIC, the Commissioner or any other Governmental Authority is required in
connection with such purchase (each, a "Notification" or an "Approval," as the
case may be), (a) Grantee shall promptly file the required notice or application
for approval ("Notice/Application"), (b) Grantee shall expeditiously process the
Notice/Application and (c) for the purpose of determining the Closing Date
pursuant to clause (ii) of this sentence, the period of time that otherwise
would run from the Notice Date shall instead run from the later of (x) in
connection with any Notification, the date on which any required notification
periods have expired or been terminated and (y) in connection with any Approval,
the date on which such approval has been obtained and any requisite waiting
period or periods shall have expired. For purposes of Section 2(a) hereof, any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. On or prior to the Closing Date, Grantee shall have the right to revoke
its exercise of the Option by written notice to the Issuer given not less than
three business days prior to the Closing Date.
(f) At the closing referred to in Section 2(e) hereof, Grantee
shall pay to Issuer the aggregate purchase price for the number of shares of
Issuer Common Stock specified in the Option Notice in immediately available
funds by wire transfer to a bank account designated by Issuer; PROVIDED,
HOWEVER, that failure or refusal of Issuer to designate such a bank account
shall not preclude Grantee from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in Section 2(f) hereof, Issuer shall
deliver to Grantee a certificate or certificates representing the number of
shares of Issuer Common Stock specified in the
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Option Notice and, if the Option should be exercised in part only, a new Option
evidencing the rights of Grantee thereof to purchase the balance of the shares
of Issuer Common Stock purchasable hereunder.
(h) Certificates for Issuer Common Stock delivered at a closing
hereunder shall be endorsed with a restrictive legend substantially as follows:
The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended, and applicable state securities laws and to certain provisions of
an agreement between DS Bancor, Inc., and Xxxxxxx Financial Corporation,
dated as of October 7, 1996. A copy of such agreement is on file at the
principal office of DS Bancor, Inc., and will be provided to the holder
hereof without charge upon receipt by DS Bancor, Inc., of a written request
therefor.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the Securities and Exchange
Commission (the "SEC") or Governmental Authority responsible for administering
any applicable state securities laws or an opinion of counsel, in form and
substance satisfactory to Issuer's counsel, to the effect that such legend is
not required for purposes of the Securities Act or applicable state securities
laws; (ii) the reference to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the shares have been sold or transferred in compliance with the provisions of
this Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In addition
such certificates shall bear any other legend as may be required by law.
(i) Upon the giving by Grantee to Issuer of an Option Notice and
the tender of the applicable purchase price in immediately available funds on
the Closing Date, unless prohibited by applicable law, Grantee shall be deemed
to be the holder of record of the number of shares of Issuer Common Stock
specified in the Option Notice, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Issuer Common Stock shall not then actually be delivered to Grantee. Issuer
shall pay all expenses and other charges that may be payable in connection with
the preparation, issuance and delivery of stock certificates under this Section
2 in the name of Grantee.
SECTION 3. Issuer agrees: (i) that it shall at all times until the
termination of this Agreement have reserved for issuance upon the exercise of
the Option that number of authorized and reserved shares of Issuer Common Stock
equal to the maximum number of shares of Issuer Common Stock at any time and
from time to time issuable hereunder, all of which shares will, upon issuance
pursuant hereto, be duly authorized, validly issued, fully paid, non-assessable,
and delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights; (ii) that it will not, by
amendment of its certificate of incorporation or through reorganization,
consolidation, merger, dissolution
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or sale of assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or conditions to
be observed or performed hereunder by Issuer; (iii) promptly to take all
reasonable action as may from time to time be requested by the Grantee, at
Grantee's expense (including (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y)in the event prior approval of or
notice to the OTS, the FDIC, the Commissioner or any other Governmental
Authority, under the Home Owners Loan Act of 1933, as amended, the Change in
Bank Control Act of 1978, as amended, Section 36a-181 or Section 36a- 184, as
applicable, of the Connecticut Bank Holding Company Act, or any other applicable
federal or state banking law, is necessary before the Option may be exercised,
cooperating with Grantee in preparing such applications or notices and providing
such information to each such Governmental Authority as it may require in order
to permit Grantee to exercise the Option and Issuer duly and effectively to
issue shares of Issuer Common Stock pursuant hereto; and (iv) to take all action
provided herein to protect the rights of Grantee against dilution.
SECTION 4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein- in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any agreements and related options for which this Agreement (and the
Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date.
SECTION 5. The number of shares of Issuer Common Stock purchasable
upon the exercise of the Option shall be subject to adjustment from time to time
as follows:
(a) In the event of any change in the type or number of shares
of Issuer Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of
shares or other issuances of additional shares (other than pursuant to the
exercise of the Option), the type and number of shares of Issuer Common
Stock purchasable upon exercise hereof shall be appropriately adjusted and
proper provision shall be made so that, in the event that any additional
shares of Issuer Common Stock are to be issued or otherwise become
outstanding as a result of any such change (other than pursuant to an
exercise of the Option), the number of shares of Issuer Common Stock that
remain subject to the Option shall be increased or decreased (as
applicable) so that, after such issuance and together with shares of Issuer
Common Stock previously issued pursuant to the exercise of the Option (as
adjusted on account of any of the foregoing changes in the Issuer Common
Stock), the Option shall equal 18.6% of the number of shares of Issuer
Common Stock then issued and outstanding.
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(b) Whenever the number of shares of Issuer Common Stock
purchasable upon exercise hereof is adjusted as provided in this Section 5,
the Option Price shall be adjusted by multiplying the Option Price by a
fraction, the numerator of which shall be equal to the number of shares of
Issuer Common Stock purchasable prior to the adjustment and the denominator
of which shall be equal to the number of shares of Issuer Common Stock
purchasable after the adjustment.
SECTION 6. (a) Upon the occurrence of a Purchase Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
(whether on its own behalf or on behalf of any subsequent holder of the Option
(or part thereof) or of any of the shares of Issuer Common Stock issued pursuant
hereto), promptly prepare, file and keep current a shelf registration statement
under the Securities Act covering any shares issued and issuable pursuant to the
Option and shall use its reasonable best efforts to cause such registration
statement to become effective, and to remain current and effective for a period
not in excess of 180 days from the day such registration statement first becomes
effective, in order to permit the sale or other disposition of any shares of
Issuer Common Stock issued upon total or partial exercise of the Option ("Option
Shares") in accordance with any plan of disposition requested by Grantee.
Grantee shall have the right to demand one such registration which right shall
not be transferable except to an affiliate of Grantee. Grantee shall provide
all information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. In connection with any such registration,
Issuer and Grantee shall provide each other with representations, warranties,
indemnities and other agreements customarily given in connection with such
registration. If requested by Grantee in connection with such registration,
Issuer and Grantee shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating themselves in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements. Notwithstanding the
foregoing, if Grantee revokes any exercise notice or fails to exercise any
Option with respect to any exercise notice pursuant to Section 2(e) hereof,
Issuer shall not be obligated to continue any registration process with respect
to the sale of Option Shares issuable upon the exercise of such Option and
Grantee shall not be deemed to have demanded registration of Option Shares.
(b) In the event that Grantee requests Issuer to file a
registration statement following the failure to obtain any approval required to
exercise the Option as described in Section 9 hereof, the closing of the sale or
other disposition of the Issuer Common Stock or other securities pursuant to
such registration statement shall occur substantially simultaneously with the
exercise of the Option.
(c) Concurrently with the filing of a registration statement
under Section 6(a) hereof, Issuer shall also make all filings required to comply
with state securities laws in such number of states as Grantee may reasonably
request.
SECTION 7. (a) Upon the occurrence of a Purchase Event that occurs
prior to an Exercise Termination Event, (i) at the request (the date of such
request being the "Option Repurchase Request Date") of Grantee, Issuer shall
repurchase, subject to compliance with
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applicable law and out of funds legally available therefor, the Option from
Grantee at a price (the "Option Repurchase Price") equal to the amount by which
(A) the market/offer price (as defined below) exceeds (B) the Option Price,
multiplied by the number of shares for which the Option may then be exercised
and (ii) at the request (the date of such request being the "Option Share
Repurchase Request Date") of the owner of Option Shares from time to time (the
"Owner"), Issuer shall repurchase such number of the Option Shares from the
Owner as the Owner shall designate at a price (the "Option Share Repurchase
Price") equal to the market/offer price multiplied by the number of Option
Shares so designated. The term "market/offer price" shall mean the highest of
(i) the price per share of Issuer Common Stock at which a tender offer or
exchange offer therefor has been made after the date hereof and on or prior to
the Option Repurchase Request Date or the Option Share Repurchase Request Date,
as the case may be, (ii) the price per share of Issuer Common Stock paid or to
be paid by any third party pursuant to an agreement with Issuer (whether by way
of a merger, consolidation or otherwise), (iii) the average of the 20 highest
last sale prices for shares of Issuer Common Stock as reported within the 90-day
period ending on the Option Repurchase Request Date or the Option Share
Repurchase Request Date, as the case may be, and (iv) in the event of a sale of
all or substantially all of Issuer's assets, the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by an investment banking firm selected by Grantee or the
Owner, as the case may be, and reasonably acceptable to Issuer, divided by the
number of shares of Issuer Common Stock outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be the value determined by an investment banking firm selected by Grantee
or the Owner, as the case may be, and reasonably acceptable to Issuer. The
investment banking firm's determination shall be conclusive and binding on all
parties. For purposes of this Section 7, Purchase Event shall have the true
meaning as set forth in Section 2(c) hereof except that in both subclause (i)
and (ii) the applicable percentage of stock shall be 50% rather than 25%.
(b) Grantee or the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and/or any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within 30 business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to Grantee the Option Repurchase Price or to the Owner the
Option Share Repurchase Price.
(c) Issuer hereby undertakes to use its reasonable best efforts
to obtain all required regulatory, shareholder and legal approvals and to file
any required notices as promptly as practicable in order to accomplish any
repurchase contemplated by this Section 7. Nonetheless, to the extent that
Issuer is prohibited under applicable law or regulation, or as a consequence of
the provision as to "well capitalized" in Section 7(a) hereof, from repurchasing
any Option and/or any Option Shares in full, Issuer shall promptly so notify
Grantee and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to Grantee
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and/or the Owner, as appropriate, the portion of the Option Repurchase Price and
the Option Share Repurchase Price, respectively, that it is no longer prohibited
from delivering, within five business days after the date on which Issuer is no
longer so prohibited; PROVIDED, HOWEVER, that if Issuer at any time after
delivery of a notice of repurchase pursuant to Section 7(b) hereof is prohibited
as referred to above, from delivering to Grantee and/or the Owner, as
appropriate, the Option Repurchase Price or the Option Share Repurchase Price,
respectively, in full, Grantee or the Owner, as appropriate, may revoke its
notice of repurchase of the Option or the Option Shares either in whole or in
part whereupon, in the case of a revocation in part, Issuer shall promptly (i)
deliver to Grantee and/or the Owner, as appropriate. that portion of the Option
Purchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering after taking into account any such revocation and
(ii) deliver, as appropriate, either (A) to Grantee, a new Agreement evidencing
the right of Grantee to purchase that number of shares of Issuer Common Stock
equal to the number of shares of Issuer Common Stock purchasable immediately
prior to the delivery of the notice of repurchase less the number of shares of
Issuer Common Stock covered by the portion of the Option repurchased or, (B) to
the Owner, a certificate for the number of Option Shares covered by the
revocation.
(d) Issuer shall not enter into any agreement with any Person
(other than Grantee or a Grantee Subsidiary) for an Acquisition Transaction
unless the other Person assumes all the obligations of Issuer pursuant to this
Section 7 in the event that Grantee or the Owner elects, in its sole discretion,
to require such other Person to perform such obligations.
(e) Notwithstanding the foregoing provisions of this Section 7,
Issuer shall not be required to deliver or cause to be delivered to Grantee the
Option Repurchase Price or to the Owner the Option Share Repurchase Price to the
extent that such delivery would prevent the Acquisition Transaction described in
Section 2(b)(1) from being accounted for as a "poolings of interest," as
determined by Issuer's independent accountants. Issuer shall advise Grantee or
the Owner within 15 business days after either Grantee or Owner requests
information from Issuer as to whether, and to the extent that, Issuer intends to
rely upon this Section 7(e) to preclude Grantee or Owner from otherwise
exercising their rights under this Section 7.
SECTION 8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into a letter of intent or definitive agreement (i) to
consolidate or merge with any Person (other than Grantee or a Grantee
Subsidiary), and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any Person (other than Grantee or a
Grantee Subsidiary) to merge into Issuer, and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger. the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other property or the then
outstanding shares of Issuer Common Stock shall after such merger represent less
than 50% of the outstanding shares and share equivalents of the merged company,
or (iii) to sell or otherwise transfer all or substantially all of its assets to
any Person (other than Grantee or a Grantee Subsidiary) then, and in each such
case, such letter of intent or definitive agreement governing such transaction
shall make proper provision so that the Option shall, upon the consummation of
such transaction and upon the
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terms and conditions set forth herein, be converted into, or exchanged for, an
option (the "Substitute Option"), at the election of Grantee, of either (x) the
Acquiring Corporation (as defined below) or (y) any person that controls the
Acquiring Corporation (the Acquiring Corporation and any such controlling person
being hereinafter referred to as the "Substitute Option Issuer").
(b) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock (as is hereinafter defined) as is equal to
the market/offer price (as defined in Section 7 hereof) multiplied by the number
of shares of Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as hereinafter defined). The exercise
price of the Substitute Option per share of the Substitute Common Stock (the
"Substitute Purchase Price") shall then be equal to the Option Price multiplied
by a fraction in which the numerator is the number of shares of Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
(c) The Substitute Option shall otherwise have the same terms as
the Option, provided that if the terms of the Substitute Option cannot, for
legal reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Grantee, PROVIDED, FURTHER that
the terms of the Substitute Option shall include (by way of example and not
limitation) provisions for the repurchase of the Substitute Option and
Substitute Common Stock by the Substitute Option Issuer on the same terms and
conditions as provided in Section 7 hereof.
(d) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving corporation, and (iii) the transferee of all or any substantial
part of Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common stock issued
by the Substitute Option Issuer upon exercise of the Substitute Option.
(iii) "Average Price" shall mean the average closing price of a
share of Substitute Common Stock for the one-year period immediately
preceding the consolidation, merger or sale in question. but in no event
higher than the closing price of the shares of Substitute Common Stock on
the day preceding such consolidation, merger or sale; provided that if
Issuer is the issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of Issuer Common Stock issued by Issuer,
the corporation merging into Issuer or by any company which controls or is
controlled by such merging corporation, as Grantee may elect.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of Substitute Common Stock outstanding immediately prior to the
issuance of the Substitute
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Option. In the event that the Substitute Option would be exercisable for more
than 19.9% of the aggregate of the shares of Substitute Common Stock but for
this clause (e), the Substitute Option Issuer shall make a cash payment to
Grantee equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (e). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by Grantee and the Substitute Option Issuer. In addition,
the provisions of Section 5(a) hereof shall not apply to the issuance of any
Substitute Option and for purposes of applying Section 5(a) hereof thereafter to
any Substitute Option the percentage referred to in Section 5(a) hereof shall
thereafter equal the percentage that the percentage of the shares of Substitute
Common Stock subject to the Substitute Option bears to the number of shares of
Substitute Common Stock outstanding.
SECTION 9. Notwithstanding Sections 2, 6 and 7 hereof, if Grantee has
given the notice referred to in one or more of such Sections, the exercise of
the rights specified in any such Section shall be extended (a) if the exercise
of such rights requires obtaining regulatory approvals (including any required
waiting periods) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights, and (b) to the extent necessary to avoid liability
under Section 16(b) of the Exchange Act by reason of such exercise; PROVIDED
that in no event shall any closing date occur more than 12 months after the
related notice date, and, if the closing date shall not have occurred within
such period due to the failure to obtain any required approval by the OTS, the
FDIC, the Commissioner or any other Governmental Authority despite the best
efforts of Issuer or the Substitute Option Issuer, as the case may be, to obtain
such approvals, the exercise of the rights shall be deemed to have been
rescinded as of the related notice date. In the event (a) Grantee receives
official notice that an approval of the OTS, the FDIC. the Commissioner or any
other Governmental Authority required for the purchase and sale of the Option
Shares will not be issued or granted or (b) a closing date has not occurred
within 12 months after the related notice date due to the failure to obtain any
such required approval, Grantee shall be entitled to exercise the Option in
connection with the concurrent resale of the Option Shares pursuant to a
registration statement as provided in Section 6 hereof. Nothing contained in
this Agreement shall restrict Grantee from specifying alternative means of
exercising rights pursuant to Sections 2,6 or 7 hereof in the event that the
exercising of any such rights shall not have occurred due to the failure to
obtain any required approval referred to in this Section 9.
SECTION 10. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly approved by
the Board of Directors of Issuer and no other corporate proceedings on the part
of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, Issuer,
enforceable against Issuer in accordance with its terms, subject to any required
Governmental Approval, and except as enforceability thereof may be limited by
applicable bankruptcy, insolvency,
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reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought.
(b) Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Issuer Common Stock equal to the maximum number of shares of Issuer Common Stock
at any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant hereto, will be duly authorized, validly issued, fully paid,
non-assessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
SECTION 11. (a) Neither of the parties hereto may assign any of its
rights or delegate any of its obligations under this Agreement or the Option
created hereunder to any other Person without the express written consent of the
other party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event. The term "Grantee" as
used in this Agreement shall also be deemed to refer to Grantee's permitted
assigns.
(b) Any assignment of rights of Grantee to any permitted
assignee of Grantee hereunder shall bear the restrictive legend at the beginning
thereof substantially as follows:
The transfer of the option represented by this assignment and the
related option agreement is subject to resale restrictions arising under
the Securities Act of 1933, as amended, and applicable state securities
laws and to certain provisions of an agreement between DS Bancor, Inc., and
Xxxxxxx Financial Corporation dated as of October 7, 1996. A copy of such
agreement is on file at the principal office of DS Bancor, Inc., and will
be provided to any permitted assignee of the Option without charge upon
receipt of a written request therefor.
SECTION 12. Each of Grantee and Issuer will use its reasonable
efforts to make all filings with, and to obtain consents of, all third parties
and Governmental Authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
OTS, the FDIC, the Commissioner and any other Governmental Authority for
approval to acquire the shares issuable hereunder.
SECTION 13. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief. Both parties further agree
to waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that
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this provision is without prejudice to any other rights that the parties hereto
may have for any failure to perform this Agreement.
SECTION 14. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that Grantee is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7 hereof, the full number of shares of Issuer
Common Stock provided in Section 1(a) hereof (as adjusted pursuant hereto), it
is the express intention of Issuer to allow Grantee to acquire or to require
Issuer to repurchase such lesser number of shares as may be permissible without
any amendment or modification hereof.
SECTION 15. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable. telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Plan.
SECTION 16. This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto shall be governed by and
construed in accordance with the laws of the State of Delaware (but not
including the choice of law rules thereof).
SECTION 17. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement and shall be effective at the time of execution and
delivery.
SECTION 18. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder.
SECTION 19. Except as otherwise expressly provided herein or in the
Plan, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
SECTION 20. Capitalized terms used in this Agreement and not defined
herein but defined in the Plan shall have the meanings assigned thereto in the
Plan.
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SECTION 21. Nothing contained in this Agreement shall be deemed to
authorize or require Issuer or Grantee to breach any provision of the Plan or
any provision of law applicable to the Grantee or Issuer.
SECTION 22. In the event that any selection or determination is to be
made by Grantee or the Owner hereunder and at the time of such selection or
determination there is more than one Grantee or Owner, such selection shall be
made by a majority in interest of such Grantees or Owners.
SECTION 23. In the event of any exercise of the option by Grantee,
Issuer and such Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
SECTION 24. Except to the extent Grantee exercises the Option,
Grantee shall have no rights to vote or receive dividends or have any other
rights as a shareholder with respect to shares of Issuer Common Stock covered
hereby.
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IN WITNESS WHEREOF, each of the parties has caused this Option Agreement to
be executed and delivered on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
DS BANCOR, INC.,
By: /s/ XXXXX X. XXXXXXX, XX.
-----------------------------------------
Xxxxx X. XxXxxxx, Xx.
President and Chief Executive
Officer
XXXXXXX FINANCIAL CORPORATION
By: /s/ XXXXX X. XXXXX
-----------------------------------------
Xxxxx X. Xxxxx, Chairman, President
and Chief Executive Officer
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