Exhibit 2
STOCK OPTION AGREEMENT, dated as of June 15, 1996
(this "Agreement"), by and between Center Financial
Corporation, a Connecticut corporation ("Issuer"), and First
Union Corporation, a North Carolina corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an
Agreement and Plan of Mergers, dated as of June 14, 1996 (the
"Plan"), providing for, among other things, the merger of
Issuer with and into Grantee, with Grantee being the surviving
corporation; and
WHEREAS, as a condition and inducement to Grantee's
execution of the Plan, Grantee has required that Issuer agree,
and Issuer has agreed, to grant Grantee the Option (as
hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and
agreements set forth herein and in the Plan, and intending to
be legally bound hereby, Issuer and Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used
but not defined herein shall have the meanings ascribed to such
terms in the Plan.
2. Grant of Option. Subject to the terms and
conditions set forth herein, Issuer hereby grants to Grantee an
irrevocable option (the "Option") to purchase up to 2,987,875
shares (as adjusted as set forth herein, the "Option Shares",
which shall include the Option Shares before and after any
transfer of such Option Shares, but in no event shall the
number of Option Shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of common
stock, par value $1.00 per share ("Issuer Common Stock"), of
Issuer) at a purchase price per Option Share (as adjusted as
set forth herein, the "Purchase Price") equal to the closing
price per share of Issuer Common Stock on June 14, 1996, as
reported by the Nasdaq National Market reporting system (as
reported in The Wall Street Journal or, if not reported
therein, another authoritative source). Each Option Share
issued upon exercise of the Option shall be accompanied by
Company Rights as provided in the Company Rights Agreement.
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3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as
hereinafter defined), as applicable, shall not be in material
breach of the agreements or covenants contained in this Agreement
or the Plan, and (ii) no preliminary or permanent injunction or
other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States
shall be in effect, the Holder may exercise the Option, in whole
or in part, at any time and from time to time following the
occurrence of a Purchase Event (as hereinafter defined); provided
that the Option shall terminate and be of no further force or
effect upon the earliest to occur of (A) the Effective Time,
(B) termination of the Plan in accordance with the terms thereof
prior to the occurrence of a Purchase Event or a Preliminary
Purchase Event other than a termination thereof by Grantee
pursuant to Section 7.02 of the Plan (but only if the breach of
Issuer giving rise to such termination was willful) (a termination
of the Plan by Grantee pursuant to Section 7.02 thereof as a
result of a willful breach by Issuer being referred to herein as a
"Default Termination"), (C) 18 months after a Default Termination,
or (D) 18 months after termination of the Plan (other than a
Default Termination) following the occurrence of a Purchase Event
or a Preliminary Purchase Event (other than a Preliminary Purchase
Event referred to in Section 3(c)(iv), in which case such 18 month
period shall be reduced to a 12 month period); provided, however,
that any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable law. The term "Holder"
shall mean the holder or holders of the Option from time to time,
and which initially is Grantee. The rights set forth in Section 8
hereof shall terminate when the right to exercise the Option
terminates (other than as a result of a complete exercise of the
Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any
of the following events:
(i) without Grantee's prior written consent,
Issuer shall have recommended, publicly proposed or publicly
announced an intention to authorize, recommend or propose,
or entered into an agreement with any person (other than
Grantee or any subsidiary of Grantee) to effect an
Acquisition Transaction. As used herein, an "Acquisition
Transaction" shall mean (A) a merger, consolidation or
similar transaction involving Issuer or any of its
significant subsidiaries (other than transactions solely
between Issuer's subsidiaries that are not violative of the
Plan), (B) the disposition, by sale, lease, exchange or
otherwise, of assets or deposits of Issuer or any of its
significant subsidiaries representing in either case 20% or
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more of the consolidated assets or deposits of Issuer and its
subsidiaries or (C) the issuance, sale or other disposition
by Issuer of (including by way of merger, consolidation,
share exchange or any similar transaction) securities
representing 20% or more of the voting power of Issuer or any
of its significant subsidiaries; or
(ii) any person (other than Grantee or any
subsidiary of Grantee) shall have acquired beneficial
ownership (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act) of or the right to acquire beneficial
ownership of, or any "group" (as such term is defined in
Section 13(d)(3) of the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire
beneficial ownership of, 20% or more of the voting power of
Issuer or any of its significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event"
means any of the following events:
(i) any person (other than Grantee or any
subsidiary of Grantee) shall have commenced (as such term is
defined in Rule 14d-2 under the Exchange Act) or shall have
filed a registration statement under the Securities Act, with
respect to, a tender offer or exchange offer to purchase any
shares of Issuer Common Stock such that, upon consummation of
such offer, such person would own or control 15% or more of
the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" or an
"Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall
not have approved the Plan by the requisite vote at the
Meeting, the Meeting shall not have been held or shall have
been canceled prior to termination of the Plan, or Issuer's
Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's
Board of Directors with respect to the Plan, in each case
after it shall have been publicly announced that any person
(other than Grantee or any subsidiary of Grantee) shall have
(A) made, or disclosed an intention to make, a bona fide
proposal to engage in an Acquisition Transaction,
(B) commenced a Tender Offer or filed a registration
statement under the Securities Act with respect to an
Exchange Offer or (C) filed an application (or given a
notice), whether in draft or final form, under the Home
Owners' Loan Act, as amended ("HOLA"), the BHCA, the Bank
Merger Act, as amended (the "BMA") or the Change in Bank
Control Act of 1978, as amended (the "CBCA"), for approval to
engage in an Acquisition Transaction; or
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(iii) any person (other than Grantee or any
subsidiary of Grantee) shall have made a bona fide proposal
to Issuer or its stockholders by public announcement, or
written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction;
or
(iv) after a proposal is made by a third party to
Issuer or its stockholders to engage in an Acquisition
Transaction, or such third party states its intention to the
Issuer to make such a proposal if the Plan terminates, Issuer
shall have breached any representation, warranty, covenant or
agreement contained in the Plan and such breach would entitle
Grantee to terminate the Plan under Section 7.02 thereof
(without regard to the cure period provided for therein
unless such cure is promptly effected without jeopardizing
consummation of the Mergers pursuant to the terms of the
Plan); or
(v) any person (other than Grantee or any
subsidiary of Grantee) other than in connection with a
transaction to which Grantee has given its prior written
consent, shall have filed an application or notice with any
Regulatory Authority for approval to engage in an Acquisition
Transaction.
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) Issuer shall notify Grantee promptly in
writing of the occurrence of any Preliminary Purchase Event or
Purchase Event, it being understood that the giving of such notice
by Issuer shall not be a condition to the right of Holder to
exercise the Option.
(e) In the event Holder 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 15 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 with the Holder in the filing of the
required notice of application for approval and the obtaining of
such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods).
Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
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4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder 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
12(f).
(b) At each Closing, simultaneously with the
delivery of immediately available funds and surrender of this
Agreement as provided in Section 4(a), (i) Issuer shall deliver to
Holder (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 and subject to no preemptive
rights, 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, and (ii) Holder shall
deliver to Issuer a letter agreeing that Holder shall not offer to
sell or otherwise dispose of such Option Shares in violation of
applicable federal and state law or of the provisions of this
Agreement.
(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 IS SUBJECT TO RESTRICTIONS ARISING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT TO THE
TERMS OF A STOCK OPTION AGREEMENT DATED AS OF JUNE 15,
1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE
HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER
OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the portion of the above legend
relating to the Securities Act shall be removed by delivery of
substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the SEC,
or an opinion of counsel in form and substance reasonably
satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act.
(d) Upon the giving by Holder to Issuer of the
written notice of exercise of the Option provided for under
Section 3(e), the tender of the applicable purchase price in
immediately available funds and the tender of this Agreement to
Issuer, Holder shall be deemed to be the holder of record of the
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shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then
be closed or that certificates representing such shares of Issuer
Common Stock shall not then be actually delivered to Holder.
Issuer shall pay all expenses, and any and all United States
federal, state, and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery
of stock certificates under this Section in the name of Holder or
its assignee, transferee, or designee.
(e) Issuer agrees (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Issuer Common Stock so that the
Option may be exercised without additional authorization of Issuer
Common Stock after giving effect to all other options, warrants,
convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of
assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by Issuer, (iii)
promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification,
reporting and waiting period requirements and (B) in the event
prior approval of or notice to any Regulatory Authority is
necessary before the Option may be exercised, cooperating fully
with Holder in preparing such applications or notices and
providing such information to such Regulatory Authority as it may
require) in order to permit Holder to exercise the Option and
Issuer duly and effectively to issue shares of the Issuer Common
Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. Representations and Warranties of Issuer. Issuer
hereby represents and warrants to Grantee (and Holder, if
different than Grantee) as follows:
(a) Corporate Authority. Issuer has full
corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of
Issuer, and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to
consummate the transactions so contemplated; this Agreement
has been duly and validly executed and delivered by Issuer.
(b) Shares Reserved for Issuance; Capital Stock.
Issuer has taken all necessary corporate action to authorize
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and reserve and permit it to issue, and at all times from the
date hereof through the termination of this Agreement in
accordance with its terms, will have reserved for issuance
upon the exercise of the Option, that number of shares of
Issuer Common Stock equal to the maximum number of shares of
Issuer Common Stock at any time and from time to time
purchasable upon exercise of the Option, and all such shares,
upon issuance pursuant to the Option, will be duly
authorized, validly issued, fully paid and nonassessable, and
will be delivered free and clear of all Liens (other than
those created by this Agreement) and not subject to any
preemptive Rights.
(c) No Violations. The execution, delivery and
performance of this Agreement does not or will not, and the
consummation by Issuer of any of the transactions
contemplated hereby will not, constitute or result in (A) a
breach or violation of, or a default under, its articles of
incorporation or bylaws, or the comparable governing
instruments of any of its subsidiaries, or (B) a breach or
violation of, or a default under, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other
obligation of it or any of its subsidiaries (with or without
the giving of notice, the lapse of time or both) or under any
law, rule, ordinance or regulation or judgment, decree,
order, award or governmental or non-governmental permit or
license to which it or any of its subsidiaries is subject,
that would, in any case give any other person the ability to
prevent or enjoin Issuer's performance under this Agreement
in any material respect.
(d) Rights Agreement. Prior to termination of
this Agreement in accordance with its terms, Issuer agrees
not to take any action that would cause First Union to be an
"Acquiring Person" or an "Adverse Person" as a result of this
Agreement.
6. Representations and Warranties of Grantee. Grantee
hereby represents and warrants to Issuer that Grantee has full
corporate power and authority to enter into this Agreement and,
subject to obtaining the approvals referred to in this Agreement,
to consummate the transactions contemplated by this Agreement; the
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Grantee; and this
Agreement has been duly executed and delivered by Grantee.
7. Adjustment. (a) In the event of any change in
Issuer Common Stock by reason of a stock dividend, stock split,
split-up, recapitalization, combination, exchange of shares,
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exercise of the Company Rights or similar transaction, the type
and number of shares or securities subject to the Option, and the
Purchase Price therefor, shall be adjusted appropriately, and
proper provision shall be made in the agreements governing such
transaction so that Holder shall receive, upon exercise of the
Option, the number and class of shares or other securities or
property that Holder 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), upon exercise of any
option to purchase Issuer Common Stock outstanding on the date
hereof or upon conversion into Issuer Common Stock of any
convertible security of Issuer outstanding on the date hereof),
the number of shares of Issuer Common Stock subject to the Option
shall be adjusted so that, after such issuance, it, together with
any shares of Issuer Common Stock previously issued pursuant
hereto, equals 19.9% of the number of shares of Issuer Common
Stock then issued and outstanding, without giving effect to any
shares subject to or issued pursuant to the Option. No provision
of this Section 7 shall be deemed to affect or change, or
constitute authorization for any violation of, any of the
covenants or representations in the Plan.
(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 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 or deposits 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 Holder, of either (x) the Acquiring Corporation
(as hereinafter defined), (y) any person that controls the
Acquiring Corporation, or (z) in the case of a merger described in
clause (ii), Issuer (such person being referred to as "Substitute
Option Issuer").
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(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 Holder. Substitute Option Issuer shall also
enter into an agreement with Holder in substantially the same form
as this Agreement, which shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for
such number of shares of Substitute Common Stock (as 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
Substitute Option per share of Substitute Common Stock (the
"Substitute Option Price") shall then be equal to the Purchase
Price multiplied by a fraction in which the numerator is the
number of shares of Issuer Common Stock for which the Option was
theretofore exercisable and the denominator is the number of
shares of the Substitute Common Stock for which the Substitute
Option is exercisable.
(e) The following terms have the meanings
indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in a
merger in which Issuer is the continuing or surviving person,
or (iii) the transferee of all or substantially all of
Issuer's assets (or a substantial part of the assets of its
subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of
capital stock (or similar equity interest) with the greatest
voting power in respect of the election of directors (or
persons similarly responsible for the direction of the
business and affairs) of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the
price per share of Issuer Common Stock at which a Tender
Offer or an Exchange Offer therefor has been made, (x) the
price per share of Issuer Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (y) the
highest closing price for shares of Issuer Common Stock
within the six-month period immediately preceding the
consolidation, merger, or sale in question and (z) in the
event of a sale of all or substantially all of Issuer's
assets or deposits an amount equal to (i) the sum of the
price paid in such sale for such assets (and/or deposits)
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and the current market value of the remaining assets of Issuer,
as determined by a nationally recognized investment banking firm
selected by Holder divided by (ii) the number of shares of
Issuer Common Stock outstanding at such time. In the event that
a Tender Offer or an Exchange Offer is made for 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 Issuer Common Stock shall be determined by a
nationally recognized investment banking firm selected by
Holder.
(4) "Average Price" shall mean the average closing
price of a share of Substitute Common Stock for the one
year immediately preceding the consolidation, merger, or
sale in question, but in no event higher than the closing
price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that
if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of
common stock issued by Issuer, the person merging into
Issuer or by any company which controls such person, as
Holder may elect.
(f) In no event, pursuant to any of the
foregoing paragraphs, shall the Substitute Option be exercisable
for more than 19.9% of the aggregate of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares
of Substitute Common Stock but for the limitation in the first
sentence of this Section 7(f), Substitute Option Issuer shall
make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the
limitation in the first sentence of this Section 7(f) over (ii)
the value of the Substitute Option after giving effect to the
limitation in the first sentence of this Section 7(f). This
difference in value shall be determined by a nationally-
recognized investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction
described in Section 7(b) 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
holders of the other shares of common stock issued by Substitute
Option Issuer are not entitled to exercise any rights by reason
of the issuance or exercise of the Substitute Option and the
shares of Substitute Common Stock are otherwise in no way
distinguishable from or have lesser economic value (other than
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any diminution in value resulting from the fact that the
Substitute Common Stock are restricted securities, as defined in
Rule 144 under the Securities Act or any successor provision)
than other shares of common stock issued by Substitute Option
Issuer).
8. Repurchase at the Option of Holder. (a) Subject
to the last sentence of Section 3(a), at the request of Holder
at any time commencing upon the first occurrence of a Repurchase
Event (as defined in Section 8(d)) and ending 12 months
immediately thereafter, Issuer shall repurchase from Holder
(i) the Option and (ii) all shares of Issuer Common Stock
purchased by Holder pursuant hereto with respect to which Holder
then has beneficial ownership. The date on which Holder
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 Holder
for any shares of Issuer Common Stock acquired pursuant to
the Option with respect to which Holder 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 Holder for each
share of Issuer Common Stock with respect to which the
Option has been exercised and with respect to which Holder
then has beneficial ownership, multiplied by the number of
such shares.
(b) If Holder exercises its rights under this
Section 8, Issuer shall, within 10 business days after the
Request Date, pay the Section 8 Repurchase Consideration to
Holder in immediately available funds, and contemporaneously
with such payment, Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common
Stock purchased thereunder with respect to which Holder then has
beneficial ownership, and Holder 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. Notwithstanding the
foregoing, to the extent that prior notification to or approval
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of any Regulatory Authority is required in connection with the
payment of all or any portion of the Section 8 Repurchase
Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to Section 8, in whole or in part,
or to require that Issuer deliver from time to time that portion
of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and 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 Holder. If any
Regulatory Authority prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the
repurchase request or (ii) to the extent permitted by such
Regulatory Authority, determine whether the repurchase should
apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the sum of the number of
shares covered by the Option in respect of which payment has been
made pursuant to Section 8(a)(ii) and the number of shares covered
by the portion of the Option (if any) that has been repurchased.
Holder shall notify Issuer of its determination under the
preceding sentence within five (5) business days of receipt of
notice of disapproval of the repurchase.
Notwithstanding anything herein to the
contrary, all of Holder's rights under this Section 8 shall
terminate on the date of termination of this Option pursuant to
Section 3(a).
(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), (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),
or (iii) the highest closing sales price per share of Issuer
Common Stock quoted on the Nasdaq National Market (or if Issuer
Common Stock is not quoted on the Nasdaq National Market, 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 chosen by Holder) during the 40
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
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investment banking firm selected by Holder, 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 Holder and reasonably
acceptable to Issuer, which determination shall be conclusive for
all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur
if (i) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership of (as such term
is defined in Rule 13d-3 promulgated under the Exchange Act), or
the right to acquire beneficial ownership of, or any "group" (as
such term is defined under the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire
beneficial ownership 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) shall be
consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall,
subject to the conditions of Section 9(c) below, if requested by
any Holder, including Grantee and any permitted transferee
("Selling Shareholder"), as expeditiously as possible prepare and
file a registration statement under the Securities Act if such
registration is necessary 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 the
Selling Shareholder upon exercise of the Option in accordance with
the intended method of sale or other disposition stated by the
Selling Shareholder in such request, including without limitation
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 for
sale under any applicable state securities laws.
(b) Additional Registration Rights. If Issuer at
any time after the exercise of the Option proposes to register any
shares of Issuer Common Stock under the Securities Act in
connection with an underwritten public offering of such Issuer
Common Stock, Issuer will promptly give written notice to the
Selling Shareholders of its intention to do so and, upon the
written request of any Selling Shareholder given within 30 days
after receipt of any such notice (which request shall specify the
number of shares of Issuer Common Stock intended to be included in
such underwritten public offering by the Selling Shareholder),
Issuer will cause all such shares for which a Selling Shareholder
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requests participation in such registration, to be so registered
and included in such underwritten public offering; provided,
however, that Issuer may elect to not cause any such shares to be
so registered (i) if the underwriters in good faith object for
valid business reasons, or (ii) in the case of a registration
solely to implement an employee benefit plan or a registration
filed on Form S-4 of the Securities Act or any successor Form;
provided, further, however, that such election pursuant to (i) may
only be made two times. If some but not all the shares of Issuer
Common Stock, with respect to which Issuer shall have received
requests for registration pursuant to this Section 9(b), shall be
excluded from such registration, Issuer shall make appropriate
allocation of shares to be registered among the Selling
Shareholders desiring to register their shares pro rata in the
proportion that the number of shares requested to be registered by
each such Selling Shareholder bears to the total number of shares
requested to be registered by all such Selling Shareholders then
desiring to have Issuer Common Stock registered for sale.
(c) Conditions to Required Registration. Issuer
shall use all reasonable efforts to cause each registration
statement referred to in Section 9(a) above to become effective
and to obtain all consents or waivers of other parties which are
required therefor and to keep such registration statement
effective, provided, however, that Issuer may delay any
registration of Option Shares required pursuant to Section 9(a)
above for a period not exceeding 90 days provided Issuer shall in
good faith determine that any such registration would adversely
affect an offering or contemplated offering of other securities by
Issuer, and Issuer shall not be required to register Option Shares
under the Securities Act pursuant to Section 9(a) above:
(i) prior to the earliest of (a) termination
of the Plan pursuant to Article VII thereof, (b) failure to
obtain the requisite stockholder approval pursuant to Section
6.01 of Article VI of the Plan, and (c) a Purchase Event or a
Preliminary Purchase Event;
(ii) on more than one occasion during any
calendar year;
(iii) within 90 days after the effective date
of a registration referred to in Section 9(b) above pursuant
to which the Selling Shareholder or Selling Shareholders
concerned were afforded the opportunity to register such
shares under the Securities Act and such shares were
registered as requested; and
(iv) unless a request therefor is made to
Issuer by Selling Shareholders that hold at least 25% or
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more of the aggregate number of Option Shares (including
shares of Issuer Common Stock issuable upon exercise of the
Option) then outstanding.
In addition to the foregoing, Issuer shall not be re-
quired to maintain the effectiveness of any registration statement
after the expiration of nine months from the effective date of such
registration statement. Issuer shall use all reasonable efforts to
make any filings, and take all steps, under all applicable state se-
curities laws to the extent necessary to permit the sale or other
disposition of the Option Shares so registered in accordance with
the intended method of distribution for such shares; provided,
however, that Issuer shall not be required to consent to general
jurisdiction or qualify to do business in any state where it is not
otherwise required to so consent to such jurisdiction or to so
qualify to do business.
(d) Expenses. Except where applicable state law
prohibits such payments, Issuer will pay all expenses (including
without limitation registration fees, qualification fees, blue sky
fees and expenses (including the fees and expenses of counsel),
legal expenses, including the reasonable fees and expenses of one
counsel to the holders whose Option Shares are being registered,
printing expenses and the costs of special audits or "cold comfort"
letters, expenses of underwriters, excluding discounts and
commissions but including liability insurance if Issuer so desires
or the underwriters so require, and the reasonable fees and expenses
of any necessary special experts) in connection with each
registration pursuant to Section 9(a) or 9(b) above (including the
related offerings and sales by holders of Option Shares) and all
other qualifications, notifications or exemptions pursuant to
Section 9(a) or 9(b) above.
(e) Indemnification. In connection with any regis-
tration under Section 9(a) or 9(b) above Issuer hereby indemnifies
the Selling Shareholders, and each underwriter thereof, including
each person, if any, who controls such holder or underwriter within
the meaning of Section 15 of the Securities Act, against all ex-
penses, losses, claims, damages and liabilities caused by any
untrue, or alleged untrue, statement of a material fact contained in
any registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission, or alleged omis-
sion, to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of
such indemnified party are caused by any untrue statement or alleged
untrue statement that was included by Issuer in any such
registration statement or prospectus or notification or offering
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circular (including any amendments or supplements thereto) in
reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use
therein, and Issuer and each officer, director and controlling
person of Issuer shall be indemnified by such Selling
Shareholders, or by such underwriter, as the case may be, for
all such expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement, that was
included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in
conformity with, information furnished in writing to Issuer by
such holder or such underwriter, as the case may be, expressly
for such use.
Promptly upon receipt by a party indemnified
under this Section 9(e) of notice of the commencement of any
action against such indemnified party in respect of which
indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified
party shall notify the indemnifying party in writing of the
commencement of such action, but the failure so to notify the
indemnifying party shall not relieve it of any liability which
it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action
shall be given to the indemnifying party as above provided, the
indemnifying party shall be entitled to participate in and, to
the extent it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense of such action
at its own expense, with counsel chosen by it and satisfactory
to such indemnified party. The indemnified party shall have the
right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of
such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the
indemnifying party either agrees to pay the same, (ii) the
indemnifying party fails to assume the defense of such action
with counsel satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more
legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in
which case the indemnifying party shall be entitled to assume
the defense of such action notwithstanding its obligation to
bear fees and expenses of such counsel. No indemnifying party
shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this
Section 9(e) is unavailable to a party otherwise entitled to be
indemnified in respect of any expenses, losses, claims, damages
or liabilities referred to herein, then the indemnifying party,
in lieu of indemnifying such party otherwise entitled to be
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indemnified, shall contribute to the amount paid or payable by
such party to be indemnified as a result of such expenses,
losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative benefits received by Issuer,
the Selling Shareholders and the underwriters from the offering
of the securities and also the relative fault of Issuer, the
Selling Shareholders and the underwriters in connection with the
statements or omissions which resulted in such expenses, losses,
claims, damages or liabilities, as well as any other relevant
equitable considerations. The amount paid or payable by a party
as a result of the expenses, losses, claims, damages and
liabilities referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any action or
claim; provided, however, that in no case shall any Selling
Shareholder be responsible, in the aggregate, for any amount in
excess of the net offering proceeds attributable to its Option
Shares included in the offering. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not
joint with other holders.
In connection with any registration pursuant to
Section 9(a) or 9(b) above, Issuer and each Selling Shareholder
(other than Grantee) shall enter into an agreement containing the
indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply
with all reporting requirements and will do all such other things
as may be necessary to permit the expeditious sale at any time of
any Option Shares by the Selling Shareholders thereof in
accordance with and to the extent permitted by any rule or
regulation promulgated by the SEC from time to time, including,
without limitation, Rule 144A. Issuer shall at its expense
provide the Selling Shareholders with any information necessary
in connection with the completion and filing of any reports or
forms required to be filed by them under the Securities Act or
the Exchange Act, or required pursuant to any state securities
laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes
in connection with the issuance and the sale of the Option Shares
and in connection with the exercise of the Option, and will save
the Selling Shareholders harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any
other securities to be acquired in connection with the exercise
of the Option are then authorized for quotation or trading or
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listing on the Nasdaq National Market or any securities exchange,
Issuer, upon the request of Holder, will promptly file an
application, if required, to authorize for quotation or trading
or listing the shares of Issuer Common Stock or other securities
to be acquired upon exercise of the Option on the Nasdaq National
Market or such other securities exchange and will use its best
efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
11. Division of Option. This Agreement (and the
Option granted hereby) are exchangeable, without expense, at the
option of Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer for other Agreements
providing for Options of different denominations entitling the
holder thereof to purchase 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. Miscellaneous.
(a) Expenses. 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
Beneficiaries; Severability. This Agreement, together with the
Plan and the other documents and instruments referred to herein
and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with
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respect to the subject matter hereof and (ii) is not intended to
confer upon any person other than the parties hereto (other than
the indemnified parties under Section 9(e) and any transferees of
the Option Shares or any permitted transferee of this Agreement
pursuant to Section 12(h)) any rights or remedies hereunder. If
any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or Regulatory Authority
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 Authority determines that the Option does not permit
Holder to acquire, or does not require Issuer to repurchase, the
full number of shares of Issuer Common Stock as provided in
Section 2 (as may be adjusted herein), it is the express
intention of Issuer to allow Holder to acquire or to require
Issuer to repurchase 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 North Carolina 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 addresses set forth in the Plan (or at such
other address for a party as shall be specified by like notice).
(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 Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a
Purchase Event. Subject to the preceding sentence, this
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Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and
assigns.
(i) Further Assurances. In the event of any
exercise of the Option by the Holder, Issuer and the Holder 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.
(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.
CENTER FINANCIAL CORPORATION
By: /s/ Robert J. Narkis
--------------------
Name: Robert J. Narkis
Title: Chief Executive Officer
FIRST UNION CORPORATION
By: /s/ Kenneth R. Stancliff
------------------------
Name: Kenneth R. Stancliff
Title: Senior Vice President
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