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EXHIBIT 2.2
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND MAY BE SUBJECT TO TRANSFER RESTRICTIONS
UNDER THE FEDERAL SECURITIES LAWS
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 10, 1997 (the
"Agreement"), by and between First Citizens Financial Corporation, a Delaware
corporation ("Issuer"), and Provident Bankshares Corporation, a Maryland
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger (the "Merger Agreement"), of even date herewith, providing for,
among other things, the merger of Issuer with Grantee; and
WHEREAS, as a condition and inducement to Grantee's execution of
the Merger Agreement, Grantee has requested that Issuer agree, and Issuer has
agreed, to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein and in the Merger Agreement, and intending to be legally bound hereby,
Issuer and Grantee agree as follows:
1. Defined Terms. Capitalized terms which
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are used but not defined herein shall have the meanings ascribed to such terms
in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set
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forth herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase up to 291,388 shares (subject to adjustment as set
forth herein) (the "Option Shares") of common stock, par value $0.01 per share,
of Issuer ("Issuer Common Stock") at a purchase price (subject to adjustment
as set forth herein) of $23.00 per Option Share (the "Purchase Price"),
provided that in no event shall the number of Option Shares for which the
Option is exercisable exceed 9.9% of the issued and outstanding shares of
Issuer Common Stock without giving effect to any shares subject to or issued
pursuant to the Option.
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3. Exercise of Option. (a) Provided that (i) Grantee is not in
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material breach of the agreements or covenants contained in the Merger
Agreement and (ii) no preliminary or permanent injunction or other order
against the delivery of Option Shares issued by any court of competent
jurisdiction in the United States shall be in effect, Grantee may exercise the
Option, in whole or in 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, however,
that Grantee shall have sent the written notice of such exercise (as provided
in subsection (d) of this Section 3) within 90 days following such Subsequent
Triggering Event; and provided further, however, that any purchase of shares
upon exercise of the Option shall be subject to compliance with applicable
law; and provided further, however, that if the Option cannot be exercised on
any day because of any injunction, order or similar restraint issued by a
court of competent jurisdiction, the period during which the Option may be
exercised shall be extended so that the Option shall expire no earlier than
on the 10th business day after such injunction, order or restraint shall have
been dissolved or when such injunction, order or restraint shall have become
permanent and no longer subject to appeal, as the case may be. Each of the
following shall be an Exercise Termination Event: (i) the Effective Time;
(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 twelve months after termination of
the Merger Agreement if such termination follows the occurrence of an
Initial Triggering Event; provided, however, that if an Initial Triggering
Event continues or occurs beyond such termination and prior to the passage
of such twelve-month period, the Exercise Termination Event shall be twelve
months from the expiration of the Last Triggering Event (as hereinafter
defined) but in no event more than 15 months after such termination of the
Merger Agreement. The "Last Triggering Event" shall mean the last Initial
Triggering Event to expire. The rights set forth in Section 8 hereof shall
terminate at the time set forth in Section 8.
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(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, 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 (other than Grantee or any of its Subsidiaries)
or Issuer or any of its Subsidiaries, 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 Subsidiary of Grantee. For purposes of this Agreement,
"Acquisition Transaction" shall mean (w) a merger or consolidation, or
any similar transaction, involving Issuer or any of its Subsidiaries
(other than internal mergers, reorganizations, consolidations or
dissolutions involving only existing Subsidiaries), (x) a purchase,
lease or other acquisition of all or a substantial portion of the
consolidated assets of Issuer and its Subsidiaries, or (y) a purchase
or other acquisition (including by way of merger, consolidation, Tender
Offer or Exchange Offer (as such terms are hereinafter defined), share
exchange or otherwise) of securities representing 10% or more of the
voting power of Issuer or any of its Subsidiaries;
(ii) Any person other than Grantee or any Subsidiary of
Grantee shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Issuer
Common Stock (the term "beneficial ownership" for purposes of this Option
Agreement having the meaning assigned thereto in Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder) or any person other than Grantee or any
Subsidiary of Grantee shall have commenced (as such term is defined under
the rules and regulations of the Securities and Exchange Commission (the
"SEC")), or shall have filed or publicly disseminated a registration
statement or similar disclosure statement with respect to, a tender offer
or exchange
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offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control 10% or more
of the then outstanding shares of Issuer Common Stock (such an offer
being referred to herein as a "Tender Offer" or an "Exchange Offer,"
respectively);
(iii)(A) the holders of Issuer Common Stock shall not have
approved the Merger Agreement and the transactions contemplated thereby,
at the meeting of such stockholders held for the purpose of voting on
such agreement, (B) such meeting shall not have been held or shall have
been cancelled prior to termination of the Merger Agreement, or (C) the
Board of Directors of Issuer shall have publicly withdrawn or modified,
or publicly announced its intent 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 each
case after it shall have been publicly announced that any person other
than Grantee or any Subsidiary of Grantee shall have (x) made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction, (y) commenced a Tender Offer, or filed or publicly
disseminated a registration statement or similar disclosure statement
with respect to an Exchange Offer, or (z) filed an application (or
given a notice), whether in draft or final form, under any federal or
state banking laws seeking regulatory approval to engage in an
Acquisition Transaction; or
(iv) Issuer shall have breached any covenant or obligation
or shall have willfully breached any representation or warranty
contained in the Merger Agreement and such breach would entitle Grantee
to terminate the Merger Agreement in accordance with the terms thereof
(without regard to any cure periods provided for in the Merger Agreement
unless such cure is promptly effected without jeopardizing the
consummation of the Merger in accordance with the terms of the Merger
Agreement) after (A) a bona fide proposal is made by any person other
than Grantee or any Subsidiary of Grantee to Issuer or its stockholders
to engage in an Acquisition Transaction, (B) any person other than
Grantee or any Subsidiary of Grantee states its intention to
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Issuer or its stockholders to make a proposal to engage in an
Acquisition Transaction if the Merger Agreement terminates, or (C) any
person other than Grantee or any Subsidiary of Grantee shall have filed
an application or notice, whether in draft or final form, with any
Governmental Entity 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 20% or more of the then outstanding shares of Issuer Common Stock;
or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) of subsection (b) of this Section 3, except
that the percentage referred to in clause (y) shall be 20%.
As used in this Agreement, "Person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Grantee is entitled to under the terms of
this Agreement 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 Option Shares it intends to purchase
pursuant to such exercise and (ii) a place and date not earlier than three
business days nor later than 30 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of any regulatory authority is required in
connection with such purchase, Issuer shall cooperate in good faith with
Grantee in the filing of the required notice or application for approval and
the obtaining of any such approval and the period of time that otherwise
would run pursuant to the preceding sentence shall run instead from the date
on which, as the case may be (i) any required notification period has expired
or been terminated or (ii) such approval has been obtained, and in either
event, any requisite waiting period shall have passed.
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4. Payment and Delivery of Certificates. (a) On each Closing
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Date, Grantee shall (i) pay to Issuer, in immediately available funds by wire
transfer to a bank account designated by Issuer, an amount equal to the
Purchase Price multiplied by the number of Option Shares to be purchased on
such Closing Date and (ii) present and surrender this Agreement to the Issuer
at the address of the Issuer specified in Section 13(f) hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a) hereof, Issuer shall deliver to Grantee (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever, and (B) if the Option is exercised in part
only, an executed new agreement with the same terms as this Agreement
evidencing the right to purchase the balance of the shares of Issuer Common
Stock purchasable hereunder. If Issuer shall have issued rights or any similar
securities ("Rights") pursuant to any shareholder rights, poison pill or
similar plan (a "Shareholder Rights Plan") prior or subsequent to the date of
this Agreement and such Rights remain outstanding at the time of the issuance
of any Option Shares pursuant to an exercise of all or part of the Option
hereunder, then each Option Share issued pursuant to such exercise shall also
represent the number of Rights issued per share of Issuer Common Stock with
terms substantially the same as and at least as favorable to Grantee as are
provided under the Shareholder Rights Plan as then in effect.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE MAY BE SUBJECT
TO RESTRICTIONS ARISING UNDER THE FEDERAL SECURITIES LAWS AND PURSUANT TO
THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF MARCH 10, 1997. A COPY
OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER
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HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Grantee shall have
delivered to Issuer a copy of a letter from the staff of the SEC, or an
opinion of outside counsel reasonably satisfactory to Issuer in form and
substance reasonably satisfactory to Issuer and its counsel, to the effect
that such legend is not required for purposes of the Securities Act of 1933,
as amended (the "Securities Act").
5. Representations and Warranties of Issuer. Issuer hereby
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represents and warrants to Grantee as follows:
(a) Due Authorization. Issuer has full corporate power and
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authority to enter into 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 authorized
by all necessary corporate action on the part of Issuer. This Agreement has
been duly and validly executed and delivered by Issuer.
(b) No Violation. Neither the execution and delivery of this
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Agreement, nor the consummation of the transactions contemplated hereby, nor
compliance by Issuer with any of the terms or provisions hereof, will (i)
violate any provision of the Certificate of Incorporation (the "Organization
Certificate") or Amended ByLaws of Issuer or the certificates of incorporation,
by-laws or similar governing documents of any of its Subsidiaries or (ii) (x)
assuming that all of the consents and approvals required under applicable law
for the purchase of Option Shares upon the exercise of the Option are duly
obtained, violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Issuer or any of its
Subsidiaries, or any of their respective properties or assets, or (y) violate,
conflict with, result in a breach of any provisions of or the loss of any
benefit under, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of
or a right of termination or cancellation under, accelerate the performance
required by, or result in the
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creation of any lien, pledge, security interest, charge or other encumbrance
upon any of the respective properties or assets of Issuer or any of its
Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Issuer or any of its Subsidiaries is a
party, or by which they or any of their respective properties or assets may
be bound or affected.
(c) Authorized Stock. Issuer has taken all necessary
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corporate and other action to authorize and reserve and to permit it to issue,
and, at all times from the date of this Agreement until the obligation to
deliver Issuer Common Stock upon the exercise of the Option terminates, will
have reserved for issuance, upon exercise of the Option, shares of Issuer
Common Stock necessary for Grantee to exercise the Option, and Issuer will
take all necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock (together with any Rights which may
have been issued with respect thereto) or other securities which may be issued
pursuant to Section 7 upon exercise of the Option. The shares of Issuer
Common Stock to be issued upon due exercise of the Option, including all
additional shares of Issuer Common Stock (together with any Rights which may
have been issued with respect thereto) or other securities which may be
issuable pursuant to Section 7, upon issuance pursuant hereto, shall be duly
and validly issued, fully paid and nonassessable, and shall be delivered free
and clear of all liens, claims, charges and encumbrances of any kind or nature
whatsoever (except any such lien or encumbrance created by Grantee), including
any preemptive rights of any stockholder of Issuer.
6. Representations and Warranties of Grantee. Grantee hereby
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represents and warrants to Issuer that:
(a) Due Authorization. Grantee has corporate power and
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authority to enter into this Agreement and, subject to any required regulatory
approvals or consents, 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
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action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) Purchase Not for Distribution. This Option is not being
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acquired with a view to the public distribution thereof and neither this Option
nor any Option Shares will be transferred or otherwise disposed of except in a
transaction registered or exempt from registration under the Securities Act.
7. Adjustment upon Changes in Capitalization, etc. (a) In the
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event (i) of any change in Issuer Common Stock by reason of a stock dividend,
stock split, split-up, recapitalization, combination, exchange of shares or
similar transaction or (ii) that any Rights issued by Issuer shall become
exercisable, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, shall be adjusted appropriately, and, in the
case of any of the transactions described in clause (i) above, proper provision
shall be made in the agreements governing such transaction so that Grantee
shall receive, upon exercise of the Option, the number and class of shares or
other securities or property that Grantee would have received in respect of
Issuer Common Stock if the Option had been exercised immediately prior to such
event, or the record date therefor, as applicable. If any additional shares of
Issuer Common Stock are issued after the date of this Agreement (other than
pursuant to an event described in the first sentence of this Section 7(a)),
the number of shares of Issuer Common Stock subject to the Option shall be
adjusted so that, after such issuance, the Option, together with any shares of
Issuer Common Stock previously issued pursuant hereto, equals 9.9% of the
number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject or previously issued pursuant to the
Option.
(b) In the event that 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 Issuer Common
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Stock shall be changed into or exchanged for stock or other securities of
Issuer or any other person or cash or any other property or the outstanding
shares of Issuer Common Stock immediately prior to such merger shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Grantee, of any of (I) the Acquiring Corporation
(as defined below), (II) any person that controls the Acquiring Corporation or
(III) in the case of a merger described in clause (ii), the Issuer (such person
being referred to as the "Substitute Option Issuer").
(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 Grantee. The Substitute Option Issuer
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 the Substitute Common Stock (as hereinafter defined) as is
equal to the Assigned Value (as hereinafter defined) multiplied by the number
of shares of Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as hereinafter defined). The
exercise price of the Substitute Option per share of the Substitute Common
Stock (the "Substitute Purchase Price") shall then be equal to the Purchase
Price multiplied by a fraction in which the numerator is the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable
and the denominator is the number of shares of the Substitute Common Stock
for which the Substitute Option is exercisable.
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(e) The following terms have the meanings
indicated:
(I) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than Issuer),
(ii) Issuer in a merger in which Issuer is the continuing or surviving person,
and (iii) the transferee of all or substantially all of the Issuer's assets
(or the assets of its Subsidiaries).
(II) "Substitute Common Stock" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option.
(III) "Assigned Value" shall mean the highest of (i) the price per share
of Issuer Common Stock at which a tender offer or exchange offer therefor has
been made by any person (other than Grantee), (ii) the price per share of
Issuer Common Stock to be paid by any person (other than the Grantee) pursuant
to an agreement with Issuer, and (iii) the highest closing sales price per
share of Issuer Common Stock quoted on National Association of Securities
Dealers, Inc. Automated Quotation/National Market System ("NASDAQ") (or if
Issuer Common Stock is not quoted on NASDAQ, the highest bid price per share
as quoted on the principal trading market or securities exchange on which such
shares are traded as reported by a recognized source) within the six-month
period immediately preceding the agreement referred to in Section 7(c) hereof;
provided, however, that in the event of a sale of all or substantially all of
Issuer's assets, the Assigned Value shall be 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 Grantee or by a Grantee Majority (as defined below), divided by
the number of shares of Issuer Common Stock outstanding at the time of such
sale. In the event that an exchange offer is made for the Issuer Common Stock
or an agreement is entered into for a merger or consolidation involving
consideration other than cash, the value of the securities or other property
issuable or deliverable in exchange for the Issuer Common Stock shall be
determined by a nationally recognized investment banking firm selected by
Grantee (or a majority of interest of the Grantees if there shall be more than
one Grantee (a "Grantee Majori-
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ty")) and reasonably acceptable to Issuer, which determination shall be
conclusive for all purposes of this Agreement.
(IV) "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 the 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 Issuer, the person merging into Issuer or by
any company which controls or is controlled by such merging person, as Grantee
may elect.
(f) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 9.9% of the aggregate
of the shares of the Substitute Common Stock outstanding prior to exercise of
the Substitute Option. In the event that the Substitute Option would be
exercisable for more than 9.9% of the aggregate of the shares of Substitute
Common Stock but for this clause (f), the Substitute Option Issuer shall make a
cash payment to Grantee equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (f) over (ii) the
value of the Substitute Option after giving effect to the limitation in this
clause (f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee (or a Grantee Majority).
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder and take all other actions that may be
necessary so that the provisions of this Section 7 are given full force and
effect (including, without limitation, any action that may be necessary so
that the shares of Substitute Common Stock are in no way distinguishable from
or have lesser economic value (other than any diminution in value resulting
from the fact that the shares of Substitute Common Stock may be restricted
securities, as defined in Rule 144 under the
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Securities Act) than other shares of common stock issued by the Substitute
Option Issuer).
(h) The provisions of Sections 8, 9 and 10 shall apply to
any securities for which the Option becomes exercisable pursuant to this
Section 7 and, as applicable, references in such sections to "Issuer",
"Option", "Purchase Price" and "Issuer Common Stock" shall be deemed to be
references to "Substitute Option Issuer", "Substitute Option", "Substitute
Purchase Price" and "Substitute Common Stock", respectively.
8. Repurchase at the Option of Grantee. (a) At the request of
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Grantee at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d) below) and ending 12 months immediately thereafter,
Issuer shall repurchase from Grantee (I) the Option and (II) all shares of
Issuer Common Stock purchased by Grantee pursuant hereto with respect to which
Grantee then has beneficial ownership. The date on which Grantee exercises its
rights under this Section 8 is referred to as the "Request Date". Such
repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Grantee for any
shares of Issuer Common Stock acquired pursuant to the Option with
respect to which Grantee then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7), multiplied
by the number of shares of Issuer Common Stock with respect to which the
Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or,
in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Grantee for
each share of Issuer Common Stock with respect to which the Option has
been exer-
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cised and with respect to which Grantee then has beneficial ownership,
multiplied by the number of such shares.
(b) If Grantee exercises its rights under this Section 8,
Issuer shall, within 10 business days after the Request Date, pay the
Section 8 Repurchase Consideration to Grantee in immediately available funds
by wire transfer to a bank account designated by Grantee, and Grantee shall
surrender to Issuer the Option and the certificates evidencing the shares of
Issuer Common Stock purchased thereunder with respect to which Grantee then
has beneficial ownership, and Grantee shall warrant that it has sole record
and beneficial ownership of such shares and that the same are then free and
clear of all liens, claims, charges and encumbrances of any kind whatsoever.
Notwithstanding the foregoing, to the extent that prior notification to or
approval of any regulatory authority is required in connection with the payment
of all or any portion of the Section 8 Repurchase Consideration, Grantee shall
have the ongoing option to revoke its request for repurchase pursuant to
Section 8 or to require that Issuer (a) deliver from time to time that portion
of the Section 8 Repurchase Consideration that it is not then so prohibited
from paying and (b) promptly file the required notice or application for
approval and expeditiously process the same (and each party shall cooperate
with the other in the filing of any such notice or application and the
obtaining of any such approval). If any regulatory authority disapproves of
any part of Issuer's proposed repurchase pursuant to this Section 8, Issuer
shall promptly give notice of such fact to Grantee and redeliver to Grantee
the Option and/or Option Shares it is then prohibited from repurchasing, and
Grantee shall have the right (x) to exercise the Option as to the number of
Option Shares for which the Option was exercis-able at the Request Date less
the number of shares covered by the Option in respect of which payment has been
made pursuant to Section 8(a)(ii) hereof or (y) to revoke its request for
repurchase with respect to any Option Shares in respect of which such payment
has been made and exercise the Option as to the number of Option Shares for
which the Option was exercisable at the Request Date. Notwithstanding anything
herein to the contrary, (i) all of Grantee's rights under this Section 8 shall
terminate on the date of termination of this Option pursuant to Section 3(a)
hereof, unless this Option shall have been
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exercised in whole or part prior to the date of termination and (ii) if this
Option shall have been exercised in whole or in part prior to the date of
termination described in clause (i) above, then Grantee's rights under this
Section 8 shall terminate 12 months after such date of termination.
(c) For purposes of this Agreement, the "Applicable Price"
means the highest of (i) the highest price per share of Issuer Common Stock
paid for any such share by the person or groups described in Section 8(d)(i)
hereof, (ii) the price per share of Issuer Common Stock received by holders of
Issuer Common Stock in connection with any merger or other business
combination transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii)
hereof or (iii) the highest closing sales price per share of Issuer Common
Stock quoted on NASDAQ (or if Issuer Common Stock is not quoted on NASDAQ,
the highest bid price per share as quoted on the principal trading market or
securities exchange on which such shares are traded as reported by a
recognized source) during the 60 business days preceding the Request Date;
provided, however, that in the event of a sale of less than all of Issuer's
assets, the Applicable Price shall be 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
Grantee, divided by the number of shares of the Issuer Common Stock outstanding
at the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by Grantee
(or a Grantee Majority) and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i)
any person (other than Grantee or any of its Subsidiaries) shall have acquired
beneficial ownership of (as such term is defined in Rule 13d-3 under the
Exchange Act) or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the Exchange Act) (other than Grantee or any
Subsidiary of Grantee) shall have been formed which beneficially owns or has
the right to acquire beneficial owner-
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ship of, 50% or more of the then outstanding shares of Issuer Common Stock or
(ii) any of the transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)
(iii) hereof shall be consummated.
(e) Notwithstanding anything herein to the contrary, the
aggregate amount payable to Grantee pursuant to this Section 8 shall not
exceed $3,500,000.
9. Registration Rights. Issuer shall, if requested by Grantee
--------------------
(or if applicable, a Grantee Majority) at any time and from time to time
within two years of the date on which the Option first becomes exercisable,
provided that such period of time shall be extended by the number of days, if
any, by which Issuer shall delay the registration of the Issuer Common Stock
pursuant to the proviso contained at the end of this sentence, as expeditiously
as possible prepare and file up to two registration statements under the
Securities Act if such registration is necessary (or in any event up to two
suitable disclosure statements for federal securities law purposes if no such
registration is required under the Securities Act) in order to permit the sale
or other disposition of any or all shares of Issuer Common Stock or other
securities that have been acquired by or are issuable to Grantee upon exercise
of the Option in accordance with the intended method of sale or other
disposition stated by Grantee, including a "shelf" registration statement
under Rule 415 under the Securities Act or any successor provision, and Issuer
shall use its best efforts to qualify such shares or other securities under
any applicable state securities laws; provided, however, that Issuer may delay
for a period not to exceed 90 days filing a registration or equivalent
statement if Issuer shall in good faith determine that (i) any such
registration would adversely affect an offering or contemplated offering of
securities by Issuer or (ii) the filing of such registration or equivalent
statement would, if not so delayed, materially and adversely affect a then
proposed or pending financial project, acquisition, merger or corporate
reorganization; and provided further, that nothing contained herein shall
limit or adversely affect in any manner Grantee's rights contained in the
fourth following sentence hereof. Issuer shall use its best efforts to cause
each such registration statement to become effective, to obtain all consents
or waivers of other parties which are required therefor and to keep such
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registration statement effective for such period not in excess of 180 days from
the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. Any registration
or similar statement prepared and filed under this Section 9, and any sale
covered thereby, shall be at Issuer's expense except for underwriting discounts
or commissions, brokers' fees and the fees and disbursements of Grantee's
counsel related thereto. Grantee shall provide all information reasonably
requested by Issuer for inclusion in any registration or similar statement to
be filed hereunder. If during the time periods referred to in the first
sentence of this Section 9 Issuer effects a registration under the Securities
Act of Issuer Common Stock for its own account or for any other stockholder of
Issuer (other than on Form S-4 or Form S-8, or any successor forms or any form
with respect to a dividend reinvestment or similar plan), it shall allow
Grantee the right to participate in such registration, and such participation
shall not affect the obligation of Issuer to effect two registration statements
for Grantee under this Section 9; provided, however, that, if the managing
underwriters of such offering advise Issuer in writing that in their opinion
the number of shares of Issuer Common Stock requested by Grantee to be
included in such registration, together with the shares of Issuer Common
Stock proposed to be included in such registration, exceeds the number which
can be sold in such offering, Issuer shall include the shares requested to be
included therein by Grantee pro rata with the shares intended to be included
therein by Issuer. In connection with any registration pursuant to this
Section 9, Issuer and Grantee shall provide each other and any underwriter of
the offering with customary representations, warran-ties, covenants,
indemnification and contribution in connection with such registration.
Notwithstanding anything to the contrary contained herein, Issuer shall not be
required to register Option Shares pursuant to this Section 9 (i) prior to the
occurrence of a Subsequent Triggering Event, (ii) within 90 days after the
effective date of a registration referred to in the second preceding sentence
pursuant to which Grantee was afforded the opportunity to register Option
Shares and such shares were registered as requested, (iii) unless a request
therefor is made to Issuer by a Grantee or Grantees which hold at least 25% of
the aggregate number of Option Shares (including shares of Issuer Common Stock
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upon exercise of the Option) then outstanding and (iv) on more than two
occasions by reason of the fact that there shall be more than one Grantee as a
result of any assignment of this Agreement or division of this Agreement
pursuant to Section 11 hereof.
10. Listing. If Issuer Common Stock or any other securities to be
--------
acquired upon exercise of the Option are then authorized for quotation on
NASDAQ or any securities exchange, Issuer, upon the request of Grantee, will
promptly file an application to authorize for quotation the shares of Issuer
Common Stock or other securities to be acquired upon exercise of the Option on
NASDAQ or such other securities exchange and will use its best efforts to
obtain approval of such listing as soon as practicable.
11. Division of Option. Upon the occurrence of a Subsequent
-------------------
Triggering Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation
and surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option"
as used herein include any other 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.
12. Rights Agreement. Issuer shall not approve, adopt or amend,
-----------------
or propose the approval and adoption or amendment of, any Shareholder Rights
Plan unless such Shareholder Rights Plan contains terms which provide, to the
reasonable satisfaction of Grantee, that (a) the Rights issued pursuant
thereto will not become exer-
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cisable by virtue of the fact that Grantee is the Beneficial Owner of shares
of Issuer Common Stock (x) acquired or acquirable pursuant to the grant or
exercise of this Option and (y) held by Grantee or any of its Subsidiaries as
Trust Account Shares or DPC Shares and (b) no restrictions or limitations with
respect to the exercise of any Rights acquired or acquirable by Grantee will
result or be imposed to the extent such Rights relate to the shares of Issuer
Common Stock described in clause (a) of this Section 12. This covenant shall
survive for so long as Grantee is the Beneficial Owner of the shares of Issuer
Common Stock described in clause (a)(x) of this Section 12.
13. Miscellaneous. (a) Expenses. Except as otherwise 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.
(b) Waiver and Amendment. Any provision of this Agreement may
---------------------
be waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary;
---------------------------------------------
Severability. This Agreement, together with the Merger Agreement and the other
-------------
agreements and instruments referred to herein and therein, (a) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (b) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder. Notwithstanding anything to the contrary
contained in this Agreement or the Merger Agreement, this Agreement shall be
deemed to amend the confidentiality agreement, dated as of February 3, 1997,
between Issuer and Grantee so as to permit Grantee to enter into this Agreement
and exercise all of its rights hereunder, including its right to acquire Issuer
Common Stock upon exercise of the Option. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
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a federal or state regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of 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 Option does not permit Grantee to acquire the full
number of shares of Issuer Common Stock as provided in Section 3 hereof (as
adjusted pursuant to Section 7 hereof), it is the express intention of Issuer
to allow Grantee to acquire such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and
--------------
construed in accordance with the laws of the State of Maryland without regard
to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings
---------------------
contained herein are for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder
--------
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
If to Issuer to:
First Citizens Financial Corporation
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
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If to Grantee to:
Provident Bankshares Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(g) Counterparts. This Agreement and any amendments hereto
-------------
may be executed in two counterparts, each of which shall be considered one and
the same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
-----------
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned subsidiary of Grantee and after the occurrence of
a Subsequent Triggering Event Grantee may assign its rights under this
Agreement to one or more third parties. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns. As
used in this Agreement, Grantee shall include any person to whom this Agreement
or the Option shall be assigned by a previous Grantee in accordance with the
terms hereof.
(i) Further Assurances. In the event of any exercise of the
-------------------
Option by Grantee, Issuer and Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
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(j) Specific Performance. The parties hereto agree that this
---------------------
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for
any failure to perform this Agreement.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.
FIRST CITIZENS FINANCIAL CORPORATION
/s/ ▇▇▇▇ ▇. ▇▇▇
By --------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇
Title: President
PROVIDENT BANKSHARES CORPORATION
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
By -------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman and CEO
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