EXHIBIT A
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FORM OF STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 16, 1998, between LAKEVIEW
FINANCIAL CORP., a New Jersey corporation ("Issuer"), and DIME BANCORP, INC., an
Delaware corporation ("Grantee").
RECITALS
A. Grantee and Issuer have entered into an Agreement and Plan of
Merger, dated as of December 15, 1998 (as amended, supplemented or replaced from
time to time, the "Merger Agreement") contemplating a business combination
between Issuer and Grantee (the "Merger"). Capitalized terms used in this
Agreement and not defined herein shall have the meanings assigned thereto in the
Merger Agreement.
B. As a condition and inducement to the willingness of Grantee to
execute (and pursue the transactions contemplated by) the Merger Agreement, and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
defined below).
C. The Board of Directors of Issuer has approved the Merger Agreement
and the transactions contemplated thereby (including the Merger and the grant of
the Option (as defined below)) prior to the date hereof.
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. Grant of Option. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to an aggregate of 958,877 fully paid and nonassessable shares of the common
stock, par value $2.00 per share, of Issuer ("Common Stock") at a price per
share equal to $21.50 (such price, as adjusted if applicable, the "Option
Price"); provided 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
Common Stock. The number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to adjustment as set
forth below.
2. Exercise of Option. (a) The Holder (as defined below) may exercise
the Option, in whole or part, if, but only if, both a Preliminary Event (as
defined below) and a Triggering Event (as defined below) occur before the
occurrence of an Exercise Termination Event (as defined below), provided that
the Holder shall have sent the written notice of such exercise (as provided in
Section 2(e)) within 90 days following the first Triggering Event to occur (or
such later period as provided in Section 10). Each
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of the following shall be an "Exercise Termination Event": (1) the Effective
Time of the Merger; (2) the termination of the Merger Agreement in accordance
with the provisions thereof, if such termination occurs prior to the occurrence
of an Preliminary Event and is not a termination by Grantee pursuant to Section
8.01(b) or (e) of the Merger Agreement; or (3) the passage of eighteen months
(or such longer period as provided in Section 10) after termination of the
Merger Agreement, if such termination is concurrent with or follows the
occurrence of an Preliminary Event or is a termination by Grantee pursuant to
Section 8.01(b) or (e) of the Merger Agreement. The term "Holder" shall mean the
holder or holders of the Option. Notwithstanding anything to the contrary
contained herein, (1) 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 the Merger Agreement such that Issuer shall be
entitled to terminate the Merger Agreement pursuant to Section 8.01(b) thereof
and (2) this Agreement shall automatically terminate upon the termination of the
Merger Agreement by Issuer pursuant to Section 8.01(b) thereof as a result of
the material breach by Grantee of its representations, warranties, covenants or
agreements contained in the Merger Agreement.
(b) The term "Preliminary Event" shall mean any of the following events
or transactions occurring on or after the date hereof:
(1) Issuer or any Issuer Subsidiary (as defined below), without having
received Grantee's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as defined below) 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, and the rules and regulations thereunder
(collectively, the "1934 Act")) other than Grantee or any Grantee
Subsidiary (as defined below) or the Board of Directors of Issuer (the
"Issuer Board") shall have recommended that the shareholders of Issuer
approve or accept any Acquisition Transaction other than the Merger. For
purposes of this Agreement:
(A) "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or an
Issuer Subsidiary (other than mergers, consolidations or similar
transactions (1) involving solely Issuer and/or one or more wholly
owned Subsidiaries of the Issuer or (2) in which the voting securities
of Issuer outstanding immediately prior thereto continue to represent
(by either remaining outstanding or being converted into the voting
securities of the surviving entity of any such transaction) at least
50% of the combined voting power of the
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voting securities of the Issuer or the surviving entity outstanding
immediately after the consummation of such merger, consolidation, or
similar transaction, provided that any such transaction is not entered
into in violation of the terms of the Merger Agreement), (y) a
purchase, lease or other acquisition of 25% or more of the assets of
Issuer or an Issuer Subsidiary, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 15% or more of the voting power
of Issuer or an Issuer Subsidiary;
(B) "Subsidiary" shall have the meaning set forth in Rule 12b-2
under the 1934 Act;
(C) "Significant Subsidiary" shall have the meaning set forth in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC");
(D) "Issuer Subsidiary" shall mean any Significant Subsidiary of
Issuer; and
(E) "Grantee Subsidiary" shall mean any Subsidiary of Grantee.
(2) Any person other than the Grantee, any Grantee Subsidiary or the
Issuer's employee stock ownership plan shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 15% or more of
the outstanding shares of Common Stock (the term "beneficial ownership" for
purposes of this Agreement having the meaning assigned thereto in Section
13(d) of the 1934 Act);
(3) The shareholders of Issuer shall have voted and failed to approve
the Merger Agreement or the Merger at a meeting which has been held for
that purpose or any adjournment or postponement thereof, or such meeting
shall not have been held in violation of the Merger Agreement or shall have
been cancelled prior to termination of the Merger Agreement if, prior to
such meeting (or if such meeting shall not have been held or shall have
been cancelled, prior to such termination), it shall have been publicly
announced 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;
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(4) The Issuer Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse to
Grantee its recommendation that the shareholders of Issuer approve the
transactions contemplated by the Merger Agreement, or Issuer or an Issuer
Subsidiary shall have authorized, recommended or proposed (or publicly
announced its intention to authorize, recommend or propose) an agreement to
engage in an Acquisition Transaction with any person other than Grantee or
a Grantee Subsidiary;
(5) 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;
(6) Any person other than Grantee or any Grantee Subsidiary shall have
filed with the SEC a registration statement or tender offer materials with
respect to a potential exchange or tender offer that would constitute an
Acquisition Transaction (or filed a preliminary proxy statement with the
SEC with respect to a potential vote by its shareholders to approve the
issuance of shares to be offered in such an exchange or tender offer); or
(7) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement after any person other than Grantee or a
Grantee Subsidiary shall have made a proposal to Issuer or its shareholders
to engage in an Acquisition Transaction, and following such breach Grantee
would be entitled to terminate the Merger Agreement (whether immediately or
after the giving of notice or both).
(c) The term "Triggering Event" shall mean any of the following events
or transactions occurring after the date hereof:
(1) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(2) The occurrence of the Preliminary Event described in Section
2(b)(1), except that the percentage referred to in clause (z) of Section
2(b)(1)(A) shall be 25%.
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(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Event or Triggering Event promptly after becoming aware of
the occurrence thereof, it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (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 (1) the
total number of shares it will purchase pursuant to such exercise and (2) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided that, if prior notification to or approval of the Office of Thrift
Supervision (the "OTS") or any other regulatory or antitrust agency is required
in connection with such purchase, the Holder shall promptly file the required
notice or application for approval, shall promptly notify Issuer of such filing,
and shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which any
required notification periods have expired or been terminated or such approvals
have been obtained and any requisite waiting period or periods shall have
passed. Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.
(f) At the closing referred to in Section 2(e), the Holder shall (1)
pay to Issuer the aggregate purchase price for the shares of Common Stock
purchased pursuant to the exercise of the Option in immediately available funds
by wire transfer to a bank account designated by Issuer and (2) present and
surrender this Agreement to Issuer at its principal executive offices; provided
that the failure or refusal of the Issuer to designate such a bank account or
accept surrender of this Agreement shall not preclude the Holder from exercising
the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in Section 2(f), Issuer shall deliver to the Holder
a certificate or certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option shall have been exercised in part
only, a new Option evidencing the rights of the Holder thereof to purchase the
balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement, dated as of December _____,
1998, between the registered holder hereof and Issuer and to resale
restrictions
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arising under the Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer and will be
provided to the holder hereof without charge upon receipt by Issuer of
a written request therefor."
It is understood and agreed that: (1) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference, if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act, (2) 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 reasonable opinion of counsel
to the Holder and (3) the legend shall be removed in its entirety if the
conditions in the preceding clauses (1) and (2) are both satisfied. In addition,
such certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under Section 2(e) and the tender of the
applicable purchase price in immediately available funds, the Holder shall be
deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local taxes and other
charges that may be payable in connection with the initial preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
(j) In the event Issuer does not have sufficient authorized but
unissued shares of Common Stock to permit exercise of the Option, upon the
occurrence of a Triggering Event, for the full number of shares of Common Stock
for which the Holder elects to exercise the Option, the Issuer shall make a cash
payment to the Holder, at the Closing Date specified in, and in accordance with
the other provisions of, this Section 2, in an amount equal to the product of
(1) the difference between the Fair Market Value (as defined below) and the
Option Price and (2) the number of shares of Common Stock subject to the Option
for which the Holder provides notice to Issuer, pursuant to Section 2(e) of this
Agreement, of its election to exercise that the Issuer is unable to deliver due
to insufficient authorized shares. For purposes of this Section 2(j), Fair
Market Value shall mean the average of the "bid" and "ask" prices per share of
Common
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Stock reported by the Nasdaq National Market (as published in The Wall Street
Journal or, if not published therein, another authoritative source) for the ten
trading days immediately preceding the Closing Date. Upon the payment of the
cash amount calculated pursuant to this Section 2(j), the number of Option
Shares subject to the Option shall be reduced by the number of shares of Common
Stock for which each cash payment is made.
3. Certain Agreements of Issuer. Issuer agrees: (1) 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 per formance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by Issuer, (2) 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 that, under the Home Owners' Loan Act, as amended (the "HOLA"),
or any state or other federal banking law, prior approval of or notice to the
OTS or to any state or other federal regulatory authority is necessary before
the Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the OTS or such state
or other federal regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto and (3) promptly to take all action
provided in Sections 5 and 8 as and when required pursuant to such Sections.
4. Exchange of Option. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal office of Issuer,
for other Agreements providing for Options of different denominations entitling
the Holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggre gate the same number of shares
of 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 from
Holder of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft, destruction or
mutilation) of reasonably satisfactory indemnification by Holder, and upon
surrender and cancellation of this Agreement, if mutilated, Issuer will execute
and deliver a new Agreement of like tenor and date in substitution for the lost,
stolen, destroyed or mutilated Agreement.
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5. Adjustments. In addition to the adjustment provided for in Section
1, the number of shares of Common Stock purchasable upon the exercise of the
Option and the Option Price shall be subject to adjustment from time to time as
follows:
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of
shares or the like, the type and number of shares of 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
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 Common Stock that remain subject to the Option shall be
increased so that, after such issuance and together with shares of Common
Stock previously issued pursuant to the exercise of the Option (as adjusted
on account of any of the foregoing changes in the Common Stock), it equals
19.9% of the number of shares of Common Stock then issued and outstanding;
and
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in Section 5(a), the Option Price
shall be adjusted by multiplying the Option Price immediately prior to the
adjustment by a fraction, the numerator of which shall be equal to the
number of shares of Common Stock purchasable prior to the adjustment and
the denominator of which shall be equal to the number of shares of Common
Stock purchasable after the adjustment.
6. Registration under Securities Laws. Upon the occurrence of the first
Triggering Event that occurs prior to an Exercise Termination Event, Issuer
shall, at the request of Grantee delivered within twelve months (or such later
period as provided in Section 10) of such Triggering Event (whether on its own
behalf or on behalf of any subsequent Holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a registration statement under the 1933 Act covering any
shares issued and issuable pursuant to this Option and shall use its reasonable
best efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee (it being
understood and agreed that Grantee shall use its reasonable efforts to ensure
that any such sale or disposition shall be effected on a widely distributed
basis so that upon consummation thereof, no purchaser or transferee shall
beneficially own more than 2% of the Common Stock then outstanding). Issuer will
use its reasonable best efforts to cause such
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registration statement promptly to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand no more than two such registrations. The Issuer shall bear the
costs of such registrations (including, but not limited to, Issuer's attorneys'
fees, printing costs and filing fees), except for underwriting discounts or
commissions, brokers' fees and the fees and disbursements of Grantee's counsel
related thereto. The foregoing notwithstanding, if, at the time of any request
by Grantee for registration of Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering by Issuer of shares
of Common Stock, and if in the good faith judgment of the managing underwriter
or managing underwriters, or, if none, the sole underwriter or underwriters, of
such offering the offer and sale of the Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided that, after any such required
reduction, the number of Option Shares to be included in such offering for the
account of the Holder shall constitute at least 25% of the total number of
shares to be sold by the Holder and Issuer in the aggregate; and provided,
further, that, if such reduction occurs, then Issuer shall file a registration
statement for the balance as promptly as practicable thereafter as to which no
reduction pursuant to this Section 6 shall be permitted or occur and the Holder
shall thereafter be entitled to one additional registration and the twelve month
period referred to in the first sentence of this section shall be increased to
twenty-four months. Each such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement to be filed
hereunder. If requested by any such Holder in connection with such registration,
Issuer shall become a party to any underwriting agreement relating to the sale
of such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall the
number of registrations that Issuer is obligated to effect be increased by
reason of the fact that there shall be more than one Holder as a result of any
assignment or division of this Agreement.
7. Repurchase. (a) At any time after the occurrence of a Repurchase
Event (as defined below) (1) at the request of the Holder, 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 the Holder at
a price (the "Option Repurchase Price") equal to (A) the amount by which the
market/offer price (as defined
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below) exceeds the Option Price (B) multiplied by the number of shares for which
this Option may then be exercised and (2) at the request of the owner of Option
Shares from time to time (the "Owner"), 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
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
(1) the highest price per share of Common Stock paid by any person that acquires
beneficial ownership of 50% or more of the then outstanding Common Stock, (2)
the price per share of Common Stock to be paid by any third party pursuant to an
agreement with Issuer entered into after the date hereof and prior to the date
the Holder gives notice of the required repurchase of this Option or the Owner
gives notice of the required repurchase of Option Shares, as the case may be,
(3) the highest last sale price for shares of Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, or (4) in the event of a sale of all or
any substantial part of Issuer's or Issuer's Subsidiary'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 or Issuer Subsidiary
as determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to Issuer,
divided by the number of shares of Common Stock of Issuer outstanding at the
time of such sale on a fully-diluted basis. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder or Owner,
as the case may be, and reasonably acceptable to Issuer. Notwithstanding
anything to the contrary herein, neither the Option Repurchase Price nor the
Option Share Repurchase Price in the aggregate shall be less than the Surrender
Price (as defined in Section 11).
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within ten 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 the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law, regulation and
administrative policy from so delivering.
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(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 the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided that, if Issuer at
any time after delivery of a notice of repurchase pursuant to Section 7(b) is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Holder and/or the Owner, as
appropriate, the Option Repurchase Price and the Option Share Repurchase Price,
respectively, in full (and Issuer hereby undertakes to use its 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), the Holder or Owner 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 (1) deliver to
the Holder and/or the Owner, as appropriate, that portion of the Option
Repurchase Price and/or the Option Share Repurchase Price that Issuer is not
prohibited from delivering and (2) deliver, as appropriate, either (A) to the
Holder, a new Agreement evidencing the right of the Holder to purchase that
number of shares of Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, and/or
(B) to the Owner, 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 Section
7(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 Holder 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:
(1) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
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(2) The consummation of any Acquisition Transaction described in
Section 2(b) (1) hereof, except that the percentage referred to in clause
(z) of the definition of Acquisition Transaction shall be 50%.
8. Substitute Option. (a) In the event that prior to an Exercise
Termination Event, Issuer shall enter into an agreement (1) 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, (2) to
permit any person, other 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 Common Stock shall be
changed into or exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of Common Stock shall
after such merger or plan of exchange represent less than 50% of the outstanding
shares and share equivalents of the merged or acquiring company, or (3) to sell
or otherwise transfer all or substantially all of its or any Issuer Subsidiary's
assets 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
the Holder, of either (A) the Acquiring Corporation (as defined below) or (B)
any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (A) the continuing or surviving
person of a consolidation or merger with Issuer (if other than Issuer), (B)
the acquiring person in a plan of exchange in which Issuer is acquired, (C)
the Issuer in a merger or plan of exchange in which Issuer is the
continuing or surviving or acquiring person and (D) the transferee of all
or substantially all of Issuer's assets (or the assets of an Issuer
Subsidiary).
(2) "Substitute Common Stock" shall mean the common stock issued by the
issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the market/offer price, as defined in
Section 7(a).
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(4) "Average Price" shall mean the average closing or last sale price
(as the case may be) of a share of the Substitute Common Stock for one year
immediately preceding the consolidation, merger or sale in question, but in
no event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger or sale; provided
that, if Issuer is the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock issued by the
person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option;
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement (after giving effect for
such purpose to the provisions of Section 9), which agreement shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option 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 Holder equal to the excess of (1) the
value of the Substitute Option without giving effect to the limitation in this
Section 8(e) over (2) 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 the
Holder and reasonably acceptable to Issuer.
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(f) Issuer shall not enter into any transaction described in Section
8(a) unless the Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder.
9. Repurchase of Substitute Option. (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 (x) the amount by
which the Highest Closing Price (as defined below) exceeds the exercise price of
the Substitute Option (y) 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 or last sale price (as the case may be) for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective 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, regulation and administrative policy 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
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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 business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided that, if the Substitute Option Issuer is at any time after delivery of
a notice of repurchase pursuant to Section 9(b) 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 (1) 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 (2) deliver, as appropriate,
either (A) to the Substitute Option Holder, a new Substitute Option evidencing
the right of the Substitute Option Holder to purchase that number of shares of
the Substitute Common Stock obtained by multiplying the number of shares of the
Substitute Common Stock for which the surrendered Substitute Option was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Substitute Option Repurchase Price less the
portion thereof theretofore delivered to the Substitute Option Holder and the
denominator of which is the Substitute Option Repurchase Price, 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 Section 9(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. Extension of Time Periods. The time periods for exercise of certain
rights under Sections 2, 6, 7 and 9 shall be extended: (a) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights
(for so long as the Holder, Owner, 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, (b) during the pendency of any temporary restraining order, injunction
or other legal bar to exercise of such rights and (c) to the
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extent necessary to avoid liability under Section 16(b) of the 1934 Act by
reason of such exercise.
11. Surrender Value. (a) Grantee in its sole discretion may, at any
time during which Issuer would be required to repurchase the Option or any
Option Shares pursuant to Section 7, surrender the Option (together with any
Option Shares issued to and then owned by the Grantee or any affiliate thereof)
to Issuer in exchange for a cash payment equal to the Surrender Price (as
defined herein); provided, however, that Grantee may not exercise its rights
pursuant to this Section 11 if Issuer has previously repurchased the Option (or
any portion thereof) or any Option Shares pursuant to Section 7. The "Surrender
Price" shall be equal to the sum of (1) $5,500,000 and (2) if applicable, the
aggregate purchase price previously paid pursuant hereto by Grantee with respect
to any Option Shares, minus the sum of (3) if applicable, the amount of the net
cash profit, if any, received by Grantee pursuant to the arm's-length sale of
Option Shares (or any other securities into which such Option Shares were
converted or exchanged) to any party not affiliated with Grantee, and (4) the
amount of any Fee paid pursuant to the Merger Agreement.
(b) Grantee may exercise its right to surrender the Option and any
Option Shares pursuant to this Section 11 by surrendering for such purchase to
Issuer, at its principal office, a copy of this Agreement, together with
certificates for Option Shares, if any, accompanied by a written notice stating
(1) that Grantee elects to surrender the Option and Option Shares, if any, in
accordance with the provisions of this Section 11 and (2) the Surrender Price.
Within two business days after the surrender of the Option and the Option
Shares, if applicable, Issuer shall deliver or cause to be delivered to Grantee
the Surrender Price.
(c) To the extent that the Issuer is prohibited under applicable law or
regulation from paying the Surrender Price to Grantee in full, Issuer shall
immediately so notify Grantee and thereafter deliver, or cause to be delivered,
from time to time, to Grantee, that portion of the Surrender Price that Issuer
is not or no longer prohibited from paying, within two business days after the
date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of Surrender pursuant to Section
11(b) is prohibited under applicable law or regulation from paying to Grantee
the Surrender Price in full, (1) Issuer shall (A) use its best efforts to obtain
all required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to make such payments, (B) within two business
days of the submission or receipt of any documents relating to any such
regulatory and legal approvals, provide Grantee with copies of the same, and (C)
keep Grantee advised of both the status of any such request for regulatory and
legal approvals and any discussions with
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any relevant regulatory or other third party reasonably related to the same, and
(2) Grantee may revoke such notice of surrender by delivery of a notice of
revocation, the Exercise Termination Event shall be extended to a date six
months from the date on which the Exercise Termination Event would have occurred
if not for the provisions of this Section 11(c) (during which period Grantee may
exercise any of its rights hereunder, including any and all rights pursuant to
this Section 11).
(d) Grantee shall have rights substantially identical to those set
forth in paragraphs (a), (b) and (c) of this Section 11 with respect to the
Substitute Option and the Substitute Option Issuer during any period in which
the Substitute Option Issuer would be required to repurchase the Substitute
Option pursuant to Section 9.
12. Representations and Warranties. Issuer hereby represents and
warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the Merger
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by the Issuer Board prior to
the date hereof and no other corporate proceedings on the part of Issuer
are necessary to authorize this Agreement or to consummate the transactions
so contemplated. This Agreement has been duly and validly executed and
delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and to
permit it to issue, that number of shares of Common Stock equal to the
maximum number of shares of Common Stock 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, encum brances and security interests and not subject to
any preemptive rights.
13. Assignment. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created hereunder to
any other person, without the express written consent of the other party, except
that in the event a Preliminary Event or Triggering Event shall have occurred
prior to an Exercise Termina tion Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and obligations
hereunder following the date of such Preliminary Event or Triggering Event;
provided that until the date 15 days following the date on which the OTS has
approved an application by Grantee to acquire the shares of Common Stock subject
to the Option, Grantee may not assign its rights under the Option except in (a)
a
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widely dispersed public distribution, (b) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (c) an assignment to a single party (e.g., a broker or investment
banker) for the sole purpose of conducting a widely dispersed public
distribution on Grantee's behalf, or (d) any other manner approved by the OTS.
14. Filings and Consents. 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 contem plated by this Agreement, including, without limitation,
applying to the OTS under the HOLA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
15. Specific Performance. 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. In connection
therewith both parties waive the posting of any bond or similar requirement.
16. Severability. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section 1 hereof (as adjusted pursuant to Section 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. Notices. All notices, requests, claims, demands and other com
munications hereunder shall be deemed to have been duly given when delivered in
person, by facsimile transmission, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses or numbers of the
parties set forth in the Merger Agreement.
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18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflict of law principles thereof.
19. Counterparts. 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.
20. Expenses. 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.
21. Entire Agreement, Etc. 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 in 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 and assignees, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
* * *
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