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 October 26, 1997, be-
tween Eagle Financial Corp., a Delaware corporation ("Issuer"),
and Xxxxxxx Financial 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 uncondi-
tional, irrevocable option (the "Option") to purchase, subject
to the terms hereof, up to 1,256,991 fully paid and nonassess-
able shares of Issuer's Common Stock, par value $0.01 per share
("Common Stock"), at a price of $41.25 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.
(b) Notwithstanding anything in this Agreement or
the Merger Agreement to the contrary, (i) Grantee acknowledges
that, as of the date of this Agreement, Issuer does not have a
sufficient number of authorized but unreserved shares of Common
Stock available to fulfill its obligations under this Agreement
with respect to the issuance of the full number of shares cov-
ered by the Option, (ii) Issuer shall use its best efforts to
take any corporate action necessary to cure such insufficiency
(including, without limitation, using its best efforts to ob-
tain any required vote of Issuer's stockholders) at such time
as is appropriate to preserve Issuer's rights hereunder (but in
any event as promptly as practicable after the occurrence of an
Initial Triggering Event); and (iii) Grantee agrees that there
shall not be any breach or default under, or any liability of
Issuer in respect of, any representation, warranty, covenant or
agreement of Issuer in this Agreement or the Merger Agreement
based solely on the inability of Issuer to issue such full num-
ber of shares, or the fact of such inability, provided that
Issuer has complied with its obligations set forth in clause
(ii) of this Section 1(b).
(c) In the event that any additional shares of Com-
mon 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. Noth-
ing contained in this Section 1(b) or elsewhere in this Agree-
ment shall be deemed to authorize Issuer or Grantee to breach
any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may ex-
ercise 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 de-
fined) shall have occurred prior to the occurrence of an Exer-
cise 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 Mer-
ger; (ii) termination of the Merger Agreement in accordance
with the provisions thereof if such termination occurs prior to
the occurrence of an Initial Triggering Event except a termina-
tion by Grantee pursuant to Section 8.1(e) or Section 8.1(f) of
the Merger Agreement (in each case, unless the breach by Issuer
giving rise to such right of termination is non-volitional); or
(iii) the passage of 12 months after termination of the Merger
Agreement if such termination follows the occurrence of an Ini-
tial Triggering Event or is a termination by Grantee pursuant
to Section 8.1(e) or Section 8.1(f) of the Merger Agreement (in
each case, unless the breach by Issuer giving rise to such
right of termination is non-volitional). 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:
1. Issuer or any of its Subsidiaries (each
an "Issuer Subsidiary"), without having received Grant-
ee'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 as-
signed 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 de-
fined in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission (the "SEC")) of Is-
xxxx, (x) a purchase, lease or other acquisition or as-
sumption 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 oth-
erwise) 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 (i) 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 or (ii) merger or consolidation as to
which the common stockholders of the Issuer immediately
prior thereto own in the aggregate at least 60% of the
common stock of the surviving corporation or its pub-
licly held parent corporation immediately following con-
summation thereof be deemed to be an Acquisition Trans-
action, provided that any such transaction is not en-
tered into in violation of the terms of the Merger
Agreement;
2. Issuer or any Issuer Subsidiary, without
having received Grantee's prior written consent, shall
have authorized, recommended, proposed or publicly an-
nounced its intention to authorize, recommend or pro-
pose, 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 inten-
tion to withdraw or modify, in any manner adverse to
Grantee, its recommendation that the stockholders of
Issuer approve the transactions contemplated by the Mer-
ger Agreement in anticipation of engaging in an Acquisi-
tion Transaction;
3. Any person other than Grantee, any
Grantee Subsidiary or any Issuer Subsidiary acting in a
fiduciary capacity in the ordinary course of its busi-
ness 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 "bene-
ficial 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);
4. 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 Transac-
tion;
5. After an overture is made by a third
party to Issuer or its stockholders to engage in an Ac-
quisition 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
6. 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 Office of Thrift Supervision (the "OTS"), or other
federal or state bank or thrift regulatory authority,
which application or notice has been accepted for pro-
cessing, for approval to engage in an Acquisition Trans-
action.
(c) The term "Subsequent Triggering Event" shall
mean either of the following events or transactions occurring
after the date hereof:
1. The acquisition by any person of benefi-
cial ownership of 25% or more of the then outstanding
Common Stock; or
2. 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 writ-
ing of the occurrence of any Initial Triggering Event or Sub-
sequent 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 notifi-
cation to or approval of the OTS or of any other regulatory
agency or of Issuer's stockholders is required in connection
with such purchase, the Holder shall promptly file the re-
quired notice or application for approval and shall expedi-
tiously process the same or use best efforts to promptly ob-
tain such stockholder approval, as the case may be, and the
period of time that otherwise would run pursuant to this sen-
tence 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 aggre-
gate purchase price for the shares of Common Stock purchased
pursuant to the exercise of the Option in immediately avail-
able funds by wire transfer to a bank account designated by
Issuer, provided that failure or refusal of Issuer to desig-
nate such a bank account shall not preclude the Holder from
exercising the Option.
(g) At such closing, simultaneously with the de-
livery of immediately available funds as provided in sub-
section (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 evi-
dencing the rights of the Holder thereof to purchase the bal-
ance 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 cer-
tificate 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 let-
ter 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 of this Agree-
ment in the above legend shall be removed by delivery of sub-
stitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provi-
sions 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 both conditions in the
preceding clauses (i) and (ii) are satisfied. In addition,
such certificates shall bear any other legend as may be re-
quired 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 appli-
cable 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, notwith-
standing 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 prepara-
tion, issue and delivery of stock certificates under this
Section 2 in the name of the Holder or its assignee, trans-
feree 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, war-
rants, 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 cove-
nants, 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 re-
quirements specified in 15 U.S.C. 18a and regulations pro-
mulgated thereunder and (y) in the event, under the Home Own-
ers' Loan Act of 1933, as amended, (the "HOLA") or any other
federal or state banking or thrift law or regulations there-
under, prior approval of or notice to the OTS or to any other
federal or any state regulatory authority is necessary before
the Option may be exercised, cooperating fully with the
Holder in preparing such applications or notices and pro-
viding such information to the OTS or other federal or any
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 provid-
ing 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 here-
under. 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 mutila-
tion 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 muti-
lated, 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 obliga-
tion 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 num-
ber of shares of Common Stock purchasable upon the exercise
of the Option and the Option Price shall be subject to ad-
justment 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, con-
versions, 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 man-
ner as shall fully preserve the economic benefits provided
hereunder and proper provision shall be made in any agreement
governing any such transaction 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 ac-
cordance 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 effec-
tive 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 under-
written public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or manag-
ing underwriters, or, if none, the sole underwriter or under-
writers, of such offering the inclusion of the Holder's Op-
tion or Option Shares would interfere with the successful
marketing of the shares of Common Stock offered by Issuer,
the number of Option Shares otherwise to be covered in the
registration statement contemplated hereby may be reduced;
provided, 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 Is-
xxxx in the aggregate; and provided further, however, that if
such reduction occurs, then the Issuer shall file a regis-
tration statement for the balance as promptly as practicable
and no reduction shall thereafter occur. Each such Holder
shall provide all information reasonably requested by Issuer
for inclusion in any registration statement to be filed here-
under. If requested by any such Holder in connection with
such registration, Issuer shall become a party to any under-
writing agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of repre-
sentations, warranties, indemnities and other agreements cus-
tomarily included in secondary offering underwriting agree-
ments 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. Not-
withstanding anything to the contrary contained herein, in no
event shall Issuer be obligated to effect more than two reg-
istrations 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, multi-
plied by the number of shares for which this Option may then
be exercised (without reference to any limitation set forth
in Section 1(b) hereof) 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 desig-
nate 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 Op-
tion Shares, as the case may be, or (iv) in the event of a
sale of all or a substantial portion of Issuer's assets, the
sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as
determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and
reasonably acceptable to the Issuer, 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 selected by the
Holder or Owner, as the case may be, and reasonably accept-
able to the Issuer.
(b) The Holder and the Owner, as the case may be,
may exercise its right to require Issuer to repurchase the
Option and any Option Shares pursuant to this Section 7 by
surrendering for such purpose to Issuer, at its principal
office, 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 Repur-
chase Price therefor or the portion thereof, if any, that
Issuer is not then prohibited under applicable law and regu-
lation from so delivering (or with respect to which Issuer is
not required to give notice to, or to obtain the prior ap-
proval of, any regulatory authority in order to cause its
federally-chartered savings bank subsidiary to pay dividends
sufficient to allow it to so deliver) or with respect to
which Issuer does not require the approval (or has obtained
such approval) of its stockholders pursuant to Article Thir-
teen of Issuer's Restated Certificate of Incorporation.
(c) To the extent that Issuer is prohibited under
applicable law or regulation from repurchasing (or would be
required to give prior notice to, or to obtain the prior ap-
proval of, any regulatory authority in order to cause its
federally-chartered savings bank subsidiary to pay dividends
sufficient to allow Issuer to repurchase), or requires any
approval of its stockholders to repurchase, 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 (or with re-
spect to which Issuer has received any required funds from
its federally-chartered savings bank subsidiary), 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 para-
graph (b) of this Section 7 is prohibited under applicable
law or regulation from delivering (or would be required to
give prior notice to, or to obtain the prior approval of, any
regulatory authority in order to cause its federally-
chartered savings bank subsidiary to pay dividends sufficient
to allow Issuer to repurchase), or requires any approval of
its stockholders to deliver, 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 such ap-
proval of its stockholders and all required regulatory and
legal approvals and to file any required notices, in each
case 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 Repur-
chase Price or the Option Share Repurchase Price that Issuer
is not prohibited from delivering (or with respect to which
Issuer has received any required funds from its federally-
chartered savings bank subsidiary); and (ii) deliver, as ap-
propriate, 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 deliv-
ery 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 denomina-
tor of which is the Option Repurchase Price, or (B) to the
Owner, a certificate for the Option Shares it is then so pro-
hibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase
Event shall be deemed to have occurred (i) upon the consumma-
tion of any merger, consolidation or similar transaction in-
volving 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 Ac-
quisition 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 Termi-
nation 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 con-
tinuing 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 securi-
ties 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 gov-
erning such transaction shall make proper provision so that
the Option shall, upon the consummation of any such transac-
tion 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 indi-
cated:
a. "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation
or merger with Issuer (if other than Issuer), (ii) Is-
xxxx 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.
b. "Substitute Common Stock" shall mean the
common stock issued by the issuer of the Substitute Op-
tion 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 consolida-
tion, merger or sale in question, but in no event higher
than the closing price of the shares of Substitute Com-
mon 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 com-
puted 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 Sub-
stitute 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 substan-
tially the same form as this Agreement, which shall be appli-
cable 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 (with-
out reference to any limitation set forth in Section 1(b)
hereof), 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 frac-
tion, the numerator of which shall be the number of shares of
Common Stock for which the Option is then exercisable (with-
out reference to any limitation set forth in Section 1(b)
hereof) 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 out-
standing 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 out-
standing prior to exercise but for this clause (e), the is-
xxxx of the Substitute Option (the "Substitute Option Is-
xxxx") shall make a cash payment to Holder equal to the ex-
cess 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 Corpora-
tion.
(f) Issuer shall not enter into any transaction
described in subsection (a) of this Section 8 unless the Ac-
xxxxxxx Corporation and any person that controls the Acquir-
ing Corporation assume in writing all the obligations of Is-
xxxx hereunder.
9. (a) At the request of the holder of the Sub-
stitute Option (the "Substitute Option Holder"), the Substi-
tute 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) ex-
ceeds (ii) the exercise price of the Substitute Option, mul-
tiplied 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 ex-
tent 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 Substi-
tute 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 Substi-
tute Share Owner, as the case may be, may exercise its re-
spective 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 no-
tices stating that the Substitute Option Holder or the Sub-
stitute 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 sur-
render of the Substitute Option and/or certificates repre-
senting 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 appli-
cable law and regulation, or under any express provision of
its certificate of incorporation or similar charter document
requiring prior stockholder approval, from so delivering.
(c) To the extent that the Substitute Option Is-
xxxx is prohibited under applicable law or regulation from
repurchasing, or requires any approval of its stockholders to
repurchase, the Substitute Option and/or the Substitute
Shares in part or in full, the Substitute Option Issuer fol-
lowing 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, respec-
tively, which it is no longer prohibited from delivering,
within five business days after the date on which the Substi-
tute Option Issuer is no longer so prohibited; provided, how-
ever, that if the Substitute Option Issuer is at any time
after delivery of a notice of repurchase pursuant to subsec-
tion (b) of this Section 9 prohibited under applicable law or
regulation from delivering, or requires the any approval of
its stockholders to deliver, to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Sub-
stitute Option Repurchase Price and the Substitute Share Re-
purchase Price, respectively, in full (and the Substitute
Option Issuer shall use its best efforts to obtain any such
required stockholder approval and all required regulatory and
legal approvals, in each case 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, where-
upon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder or Sub-
stitute Share Owner, as appropriate, that portion of the Sub-
stitute Option Repurchase Price or the Substitute Share Re-
purchase Price that the Substitute Option Issuer is not pro-
hibited 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, for the expiration of all
statutory waiting periods, and to the extent required to ob-
tain any required stockholder approval or until such stock-
holder approval is no longer required; 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 pro-
ceedings on the part of Issuer (other than the shareholder
approval referred to in Sections 2(e), 7(b) and 9(c) hereof)
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 ac-
tion 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 re-
served 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 pursu-
ant hereto, will be duly authorized, validly issued, fully
paid, nonassessable, and will be delivered free and clear of
all claims, liens, encumbrance and security interests and not
subject to any preemptive rights.
12. Grantee hereby represents and warrants to Is-
xxxx 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 neces-
sary 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. 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 and applicable restrictions
under law, may assign in whole or in part its rights and ob-
ligations hereunder within 90 days following such Subsequent
Triggering Event (or such later period as provided in Section
10).
14. 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
have approved for quotation the shares of Common Stock issu-
able hereunder on the NASDAQ Stock Market National Market
upon official notice of issuance and applying to the OTS un-
der 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. 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 par-
ties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restric-
tion contained in this Agreement is held by a court or a fed-
eral 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 per-
mitted 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.
17. 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 (post-
age prepaid, return receipt requested) at the respective ad-
dresses of the parties set forth in the Merger Agreement.
18. This Agreement shall be governed by and con-
strued in accordance with the laws of the State of Delaware,
without regard to any conflicts of laws rules.
19. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an origi-
nal, but all of which shall constitute one and the same
agreement.
20. 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 bank-
ers, accountants and counsel.
21. Except as otherwise expressly provided herein
or in the Merger Agreement, this Agreement contains the en-
tire agreement between the parties with respect to the trans-
actions contemplated hereunder and supersedes all prior ar-
rangements 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 con-
fer upon any party, other than the parties hereto, and their
respective successors and permitted assigns, any rights, rem-
edies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and
not defined herein shall have the meanings assigned thereto
in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused
this Agreement to be executed on its behalf by its officers
thereunto duly authorized, all as of the date first above
written.
EAGLE FINANCIAL CORP.
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief
Executive Officer
XXXXXXX FINANCIAL CORPORATION
By: /s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: Chairman and Chief
Executive Officer
[Stock Option Agreement]