Exhibit 2.3
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated April 7, 1998, between HOUSEHOLD
INTERNATIONAL, INC., a Delaware corporation ("Issuer"), and BENEFICIAL
CORPORATION, a Delaware corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has
been executed by the parties hereto immediately prior to this Stock Option
Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee
the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof,
up to 21,356,536 fully paid and nonassessable shares of Issuer's Common
Stock, par value $1.00 per share ("Common Stock"), at a price of $146.75
per share (the "Option Price"); provided, however, that in no event shall
the number of shares of Common Stock for which this Option is exercisable
exceed 19.9% of the Issuer's issued and outstanding shares of Common Stock
without giving effect to any shares subject to or issued pursuant to the
Option. The number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to adjustment as
herein set forth. In the event that any additional shares of Common Stock
are either (i) issued or otherwise become outstanding after the date of
this Agreement (other than pursuant to this Agreement) or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of
the Agreement, the number of shares of Common Stock subject to the Option
shall be increased or decreased, as appropriate, so that, after such
issuance, such number equals 19.9% of the number of shares of Common Stock
then issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this Section 1(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee
to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option,
in whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event
(as hereinafter defined) shall have occurred prior to the occurrence of an
Exercise Termination Event (as hereinafter defined), provided that the
Holder shall have sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within 90 days following such Subsequent
Triggering Event. Each of the following shall be an "Exercise Termination
Event": (i) the Effective Time (as defined in the Merger Agreement) of
the Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event; or (iii) the passage of 12 months after
termination of the Merger Agreement if such terminations follows the
occurrence of an Initial Triggering Event (provided that if an Initial
Triggering Event continues or occurs beyond such termination and prior to
the passage of such 12 month period, the Exercise Termination event shall
be 12 months from the expiration of the Last Triggering Event but in no
event more than 18 months after such termination). The "Last Triggering
Event" shall mean the last Initial Triggering Event to expire. The term
"Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and the rules and
regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer
shall have recommended that the stockholders of Issuer approve or
accept any Acquisition Transaction. For purposes of this Agreement,
"Acquisition Transaction" shall mean (w) a merger or consolidation, or
any similar transaction, involving Issuer or any Significant
Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by
the Securities and Exchange Commission (the "SEC")) of Issuer, (x) a
purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of Issuer or any
Significant Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power
of Issuer, or (z) any substantially similar transaction; provided,
however, that in no event shall any merger, consolidation, purchase or
similar transaction involving only the Issuer and one or more of its
Subsidiaries or involving only any two or more of such Subsidiaries,
be deemed to be an Acquisition Transaction, provided that any such
transaction is not entered into in violation of the terms of the
Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend
or propose, to engage in an Acquisition Transaction with any person
other than Grantee or a Grantee Subsidiary, or the Board of Directors
of Issuer shall have publicly withdrawn or modified, or publicly
announced its intention to withdraw or modify, in any manner adverse
to Grantee, its recommendation that the stockholders of Issuer approve
the transactions contemplated by the Merger Agreement in anticipation
of engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary
or any Issuer Subsidiary acting in a fiduciary capacity in the
ordinary course of its business shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 10% or more
of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its stockholders by
public announcement or written communication that is or becomes the
subject of public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall
have breached any covenant or obligation contained in the Merger
Agreement and such breach (x) would entitle Grantee to terminate the
Merger Agreement and (y) shall not have been cured prior to the Notice
Date (as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given
its prior written consent, shall have filed an application or notice
with the Federal Reserve Board, or other federal or state bank
regulatory authority, which application or notice has been accepted
for processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 25%
or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event of which it
has notice (together, a "Triggering Event"), it being understood that the
giving of such notice by Issuer shall not be a condition to the right of
the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business days from
the Notice Date for the closing of such purchase (the "Closing Date");
provided that if prior notification to or approval of the Federal Reserve
Board or any other regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application
for approval and shall expeditiously process the same and the period of
time that otherwise would run pursuant to this sentence shall run instead
from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite
waiting period or periods shall have passed. Any exercise of the Option
shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
the Holder shall pay to Issuer the aggregate purchase price for the shares
of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated
by Issuer, provided that failure or refusal of Issuer to designate such a
bank account shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer
shall deliver to the Holder a certificate or certificates representing the
number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder,
and the Holder shall deliver to Issuer a copy of this Agreement and a
letter agreeing that the Holder will not offer to sell or otherwise dispose
of such shares in violation of applicable law or the provisions of this
Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder hereof
and Issuer and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof without charge
upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in
the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a copy
of a letter from the staff of the SEC, or an opinion of counsel, in form
and substance reasonably satisfactory to Issuer, to the effect that such
legend is not required for purposes of the 1933 Act; (ii) the reference to
the provisions to this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required
by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2
and the tender of the applicable purchase price in immediately available
funds, the Holder shall be deemed to be the holder of record of the shares
of Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually
delivered to the Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of the Holder or its
assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury
shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase
Common Stock; (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by
any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer; (iii) promptly to take all
action as may from time to time be required (including (x) complying with
all premerger notification, reporting and waiting period requirements
specified in 15 U.S.C. ss. 18a and regulations promulgated thereunder and (y)
in the event, under the Bank Holding Company Act of 1956, as amended (the
"BHCA"), or the Change in Bank Control Act of 1978, as amended, or any
state banking law, prior approval of or notice to the Federal Reserve Board
or to any state regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such applications
or notices and providing such information to the Federal Reserve Board or
such state regulatory authority as they may require) in order to permit the
Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of the Holder against
dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Stock Option Agreements and related
Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Agreement, and (in
the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Agreement, if
mutilated, Issuer will execute and deliver a new Agreement of like tenor
and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not
the Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section
1 of this Agreement, the number of shares of Common Stock purchasable upon
the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as provided in this Section 5. In the event
of any change in, or distributions in respect of, the Common Stock by
reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares, distributions
on or in respect of the Common Stock that would be prohibited under the
terms of the Merger Agreement, or the like, the type and number of shares
of Common Stock purchasable upon exercise hereof and the Option Price shall
be appropriately adjusted in such manner as shall fully preserve the
economic benefits provided hereunder and proper provision shall be made in
any agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within 90 days of such Subsequent 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 shelf
registration statement under the 1933 Act covering this Option and any
shares issued and issuable pursuant to this Option and shall use its
reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other
disposition of this Option and any shares of Common Stock issued upon total
or partial exercise of this Option ("Option Shares") in accordance with any
plan of disposition requested by Grantee. Issuer will use its reasonable
best efforts to cause such registration statement first to become effective
and then to remain effective for such period not in excess of 180 days from
the day such registration statement first becomes effective or such shorter
time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such
registrations. The foregoing notwithstanding, if, at the time of any
request by Grantee for registration of the Option or Option Shares as
provided above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none,
the sole underwriter or underwriters, of such offering the inclusion of the
Holder's Option or Option Shares would interfere with the successful
marketing of the shares of Common Stock offered by Issuer, the number of
Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; and provided, however, that after any
such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer in the
aggregate; and provided further, however, that if such reduction occurs,
then the Issuer shall file a registration statement for the balance as
promptly as practical and no reduction shall thereafter occur. Each such
Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If
requested by any such Holder in connection with such registration, Issuer
shall become a party to any underwriting agreement relating to the sale of
such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in secondary offering underwriting agreements for the Issuer.
Upon receiving any request under this Section 6 from any Holder, Issuer
agrees to send a copy thereof to any other person known to Issuer to be
entitled to registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything to the
contrary contained herein, in no event shall Issuer be obligated to effect
more than two registrations pursuant to this Section 6 by reason of the
fact that there shall be more than one Grantee as a result of any
assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event
(as defined below), (i) following a request of the Holder, delivered prior
to an Exercise Termination Event, Issuer (or any successor thereto) shall
repurchase the Option from the Holder at a price (the "Option Repurchase
Price") equal to the amount by which (A) the Market/Offer Price (as defined
below) exceeds (B) the Option Price, multiplied by the number of shares for
which this Option may then be exercised and (ii) at the request of the
owner of Option Shares from time to time (the "Owner"), delivered within 90
days of such occurrence (or such later period as provided in Section 10),
Issuer shall repurchase such number of the Option Shares from the Owner as
the Owner shall designate at a price (the "Option Share Repurchase Price")
equal to the Market/Offer Price multiplied by the number of Option Shares
so designated. The term "Market/Offer Price" shall mean the highest of (i)
the price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (iii) the
highest closing price for shares of Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the
required repurchase of this Option or the Owner gives notice of the
required repurchase of Option Shares, as the case may be, or (iv) in the
event of a sale of all or a substantial portion of Issuer's assets, the sum
of the price paid in such sale for such assets and the current market value
of the remaining assets of Issuer as determined by a nationally recognized
investment banking firm mutually selected by the Holder or the Owner, as
the case may be, on the one hand, and the Issuer, on the other, divided by
the number of shares of Common Stock of Issuer outstanding at the time of
such sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a nationally
recognized investment banking firm mutually selected by the Holder or
Owner, as the case may be, on the one hand, and the Issuer, on the other.
(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. Within the latter to occur of (x) five
business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices
relating thereto and (y) the time that is immediately prior to the
occurrence of a Repurchase Event, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof that Issuer
is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full,
Issuer shall immediately so notify the Holder and/or the Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Holder and/or the Owner, as appropriate, the portion of the Option
Repurchase Price and the Option Share Repurchase Price, respectively, that
it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however,
that if Issuer at any time after delivery of a notice of repurchase
pursuant to paragraph (b) of this Section 7 is prohibited under applicable
law or regulation from delivering to the Holder and/or the Owner, as
appropriate, the Option Repurchase Price and the Option Share Repurchase
Price, respectively, in full (and Issuer hereby undertakes to use its best
efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Issuer is
not prohibited from delivering; and (ii) deliver, as appropriate, either
(A) to the Holder, a new Stock Option Agreement evidencing the right of the
Holder to purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the surrendered
Stock Option Agreement was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Option
Repurchase Price less the portion thereof theretofore delivered to the
Holder and the denominator of which is the Option Repurchase Price, or
(B) to the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase,
lease or other acquisition of all or a substantial portion of the assets of
Issuer, other than any such transaction which would not constitute an
Acquisition Transaction pursuant to the provisos to Section 2(b)(i) hereof
or (ii) upon the acquisition by any person of beneficial ownership of 50%
or more of the then outstanding shares of Common Stock, provided that no
such event shall constitute a Repurchase Event unless a Subsequent
Triggering Event shall have occurred prior to an Exercise Termination
Event. The parties hereto agree that Issuer's obligations to repurchase
the Option or Option Shares under this Section 7 shall not terminate upon
the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into
any person, other than Grantee or one of its Subsidiaries, and shall not be
the continuing or surviving corporation of such consolidation or merger,
(ii) to permit any person, other than Grantee or one of its Subsidiaries,
to merge into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then outstanding
shares of Common Stock shall be changed into or exchanged for stock or
other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger represent
less than 50% of the outstanding voting shares and voting share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of
its Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing
or surviving corporation of a consolidation or merger with Issuer
(if other than Issuer), (ii) Issuer in a merger in which Issuer
is the continuing or surviving person, and (iii) the transferee
of all or substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of
the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of
a share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in
question, but in no event higher than the closing price of the
shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is the
issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by the
person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to the Holder. The issuer of
the Substitute Option shall also enter into an agreement with the then
Holder or Holders of the Substitute Option in substantially the same form
as this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option is
then exercisable, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal
to the Option Price multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock for which the Option is then
exercisable and the denominator of which shall be the number of shares of
Substitute Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for
more than 19.9% of the shares of Substitute Common Stock outstanding prior
to exercise but for this clause (e), the issuer of the Substitute Option
(the "Substitute Option Issuer") shall make a cash payment to Holder equal
to the excess of (i) the value of the Substitute Option without giving
effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (e).
This difference in value shall be determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case
may be, and reasonably acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to (x) the amount by which (i)
the Highest Closing Price (as hereinafter defined) exceeds (ii) the
exercise price of the Substitute Option, multiplied by the number of shares
of Substitute Common Stock for which the Substitute Option may then be
exercised plus (y) Grantee's reasonable out-of-pocket expenses (to the
extent not previously reimbursed), 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 (x) the Highest Closing Price multiplied by the number of
Substitute Shares so designated plus (y) Grantee's reasonable Out-of-Pocket
Expenses (to the extent not previously reimbursed). The term "Highest
Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding
the date the Substitute Option Holder gives notice of the required
repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective right to require the
Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by surrendering for such
purpose to the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such an
agreement, a copy of this Agreement) and certificates for Substitute Shares
accompanied by a written notice or notices stating that the Substitute
Option Holder or the Substitute Share Owner, as the case may be, elects to
require the Substitute Option Issuer to repurchase the Substitute Option
and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five
business days after the surrender of the Substitute Option and/or
certificates representing Substitute Shares and the receipt of such notice
or notices relating thereto, the Substitute Option Issuer shall deliver or
cause to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or, in either case, the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation from repurchasing the Substitute Option
and/or the Substitute Shares in part or in full, the Substitute Option
Issuer following a request for repurchase pursuant to this Section 9 shall
immediately so notify the Substitute Option Holder and/or the Substitute
Share Owner and thereafter deliver or cause to be delivered, from time to
time, to the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Share Repurchase Price,
respectively, which it is no longer prohibited from delivering, within five
business days after the date on which the Substitute Option Issuer is no
longer so prohibited; provided, however, that if the Substitute Option
Issuer is at any time after delivery of a notice of repurchase pursuant to
subsection (b) of this Section 9 prohibited under applicable law or
regulation from delivering to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and
the Substitute Option Issuer shall use its best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order
to accomplish such repurchase), the Substitute Option Holder or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or
the Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly
(i) deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to
the Substitute Option Holder, a new Substitute Option evidencing the right
of the Substitute Option Holder to purchase that number of shares of the
Substitute Common Stock obtained by multiplying the number of shares of the
Substitute Common Stock for which the surrendered Substitute Option was
exercisable at the time of delivery of the notice of repurchase by a
fraction, the numerator of which is the Substitute Option Repurchase Price
less the portion thereof theretofore delivered to the Substitute Option
Holder and the denominator of which is the Substitute Option Repurchase
Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Common Shares it is then so prohibited from repurchasing.
10. The 90-day period for exercise of certain rights under Sections
2, 6, 7 and 14 shall be extended: (i) to the extent necessary to obtain
all regulatory approvals for the exercise of such rights, and for the
expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the 1934 Act by reason
of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This Agreement has been
duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common
Stock at any time and from time to time issuable hereunder, and all such
shares, upon issuance pursuant hereto, will be duly authorized, validly
issued, fully paid, nonassessable, and will be delivered free and clear of
all claims, liens, encumbrance and security interests and not subject to
any preemptive rights.
(c) Issuer has taken all action (including if required redeeming all
of the Rights or amending or terminating the Rights Agreement) so that the
entering into of this Option Agreement, the acquisition of shares of Common
Stock hereunder and the other transactions contemplated hereby do not and
will not result in the grant of any rights to any person under the Rights
Agreement or enable or require the Rights to be exercised, distributed or
triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act.
13. (a) Notwithstanding anything to the contrary contained herein,
in no event shall Grantee's Total Profit (as defined below in Section 13(c)
hereof) exceed $240 million.
(b) Notwithstanding anything to the contrary contained herein, the
Option may not be exercised for a number of shares as would, as of the date
of exercise, result in a Notional Total Profit (as defined below in Section
13(d) hereof) of more than $240 million; provided, that nothing in this
sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 7 hereof, (ii) (x) the amount received by Grantee
pursuant to Issuer's repurchase of Option Shares pursuant to Section 7
hereof, less (y) Grantee's purchase price for such Option Shares, (iii) (x)
the net cash amounts received by Grantee pursuant to the sale of Option
Shares (or any other securities into which such Option Shares shall be
converted or exchanged) to any unaffiliated party, less (y) Grantee's
purchase price of such Option Shares, (iv) any amounts received by Grantee
on the transfer of the Option (or any portion thereof) to any unaffiliated
party, and (v) any equivalent amount with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of shares as to which Grantee may propose to exercise the Option
shall be the Total Profit determined as of the date of such proposed
exercise assuming that the Option were exercised on such date for such
number of shares and assuming that such shares, together with all other
Option Shares held by Grantee and its affiliates as of such date, were sold
for cash at the closing market price for the Issuer Common Stock as of the
close of business on the preceding trading day (less customary brokerage
commissions).
14. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to
any other person, without the express written consent of the other party,
except that in the event a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 90 days following such Subsequent Triggering
Event (or such later period as provided in Section 10); provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board approves an application by Grantee under the BHCA to acquire the
shares of Common Stock subject to the Option, Grantee may not assign its
rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the
right to purchase in excess of 2% of the voting shares of Issuer, (iii) an
assignment to a single party (e.g., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on Grantee's
behalf, or (iv) any other manner approved by the Federal Reserve Board.
15. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated
by this Agreement, including without limitation making application to list
the shares of Common Stock issuable hereunder on the New York Stock
Exchange upon official notice of issuance and applying to the Federal
Reserve Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder
of the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to acquire,
or Issuer is not permitted to repurchase pursuant to Section 7, the full
number of shares of Common Stock provided in Section 1(a) hereof (as
adjusted pursuant to Section 1(b) or 5 hereof), it is the express intention
of Issuer to allow the Holder to acquire or to require Issuer to repurchase
such lesser number of shares as may be permissible, without any amendment
or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person,
by cable, telegram, telecopy or telex, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
20. 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.
21. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors except as assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
23. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as
of the date first above written.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
__________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman of the Board and Chief
Executive Officer
BENEFICIAL CORPORATION
By: /s/ Xxxx X. X. Xxxxxxxxx
_________________________________
Name: Xxxx X. X. Xxxxxxxxx
Title: Chairman of the Board and Chief
Executive Officer
