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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 28, 1998
PIONEER BANCSHARES, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-84254 62-1469913
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
801 Broad Street, Chattanooga, Tennessee 37402
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(Addresses of Principal Executive Offices, including Zip Code)
(423) 755-0000
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(Registrant's Telephone Number, including Area Code)
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ITEM 5. OTHER EVENTS.
On May 28, 1998 Pioneer Bancshares, Inc. (the "Company") and First
American Corporation jointly announced the signing of an Agreement and Plan of
Merger pursuant to which the Company will merge with and into First American
Corporation, and a Stock Option Agreement pursuant to which the Company has
granted an option to First American Corporation to purchase up to 748,222 shares
of Company $0.01 par value common stock at an exercise price per share (subject
to adjustment) of $67.50.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS.
(c) Exhibits.
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
99.1 Press Release
99.2 Stock Option Agreement dated as of May 28,
1998 between Pioneer Bancshares, Inc. and
First American Corporation
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PIONEER BANCSHARES, INC.
(REGISTRANT)
/s/ Rodger B. Holley
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Rodger B. Holley
President
Date: June 4, 1998
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
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<S> <C>
99.1 Press Release
99.2 Stock Option Agreement dated as of May 28, 1998 between
Pioneer Bancshares, Inc. and First American Corporation
</TABLE>
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Exhibit 99.1
Press Release
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THURSDAY MAY 28, 7:32 PM EASTERN TIME
COMPANY PRESS RELEASE
SOURCE: FIRST AMERICAN CORPORATION
FIRST AMERICAN CORPORATION TO ACQUIRE PIONEER BANCSHARES INC.
NASHVILLE, Tenn., May 28 /PRNewswire/ -- First American Corporation (Nasdaq:
FATN) today announced it has reached a definitive agreement to acquire Pioneer
Bancshares Inc. [OTC BB:PSHR] in a transaction valued at approximately $297
million.
Pioneer Bancshares is a $990 million bank holding company headquartered in
Chattanooga, Tenn. The company's banking subsidiaries are: Pioneer Bank
(Chattanooga, Tenn.), Valley Bank (Sweetwater, Tenn.) and Pioneer Bank f.s.b.
(East Ridge, Tenn.), a federal savings bank. Pioneer has 34 banking offices in
southeast Tennessee and northwest Georgia. Of those 34 offices, 23 are Pioneer
Bank offices in Hamilton, Marion and Sequatchie Counties, nine are Valley Bank
offices in Meigs, Monroe and McMinn Counties and two are Pioneer Bank f.s.b.
offices in Hamilton County Tenn., and Whitfield County in Georgia.
Pioneer commands the largest deposit market share in Monroe County and the third
largest in Hamilton and Marion Counties. The addition of these markets
solidifies First American's presence in the fourth largest market in Tennessee.
Under the terms of the agreement, Pioneer shareholders will receive, in a
tax-free exchange, 1.65 shares of First American common stock for each share of
Pioneer stock. Banking operations of Pioneer will be consolidated with First
American and will operate under the First American name. Also, a stock option
has been granted to First American to purchase up to 19.9% of issued and
outstanding common shares of Pioneer.
Dennis C. Bottorff, First American chairman and CEO, and Rodger B. Holley,
chairman, president and CEO of Pioneer made the joint announcement.
"The addition of Pioneer is a strategic geographic fit which gives First
American the third leading market share in the Chattanooga MSA," Bottorff said.
"We are excited to have a stronger presence in this area. It will better enable
us to serve our clients with greater access and convenience to meet their
individual financial needs."
Holley said, "Our combination with First American serves as a continuance of the
value we place on customer service and relationship banking. First American's
tailored client solutions will offer our clients broader product and service
lines, coupled with an added emphasis on consumer and small business lending."
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The transaction is subject to regulatory approval and a vote of Pioneer
shareholders. It is expected to close in the fourth quarter of 1998. The merger
will be accounted for as a pooling-of-interests and is expected to be neutral to
1999 earnings and accretive to First American's 2000 earnings. These
expectations are based on estimated cost and revenue savings of approximately 40
percent of Pioneer's cost base. First American expects to incur restructuring
and merger-related, pre-tax charges of approximately $16 million.
Pioneer's 1997 net income was $9.8 million. Its return on average assets (ROA)
was 1.07 percent and its return on average equity (ROE) was 10.2 percent for the
period. In addition, Pioneer achieved an efficiency ratio of 62.6 percent and a
net interest margin of 4.70 percent. At Dec. 31, 1997, its allowance for loan
losses equaled 1.23 percent of loans, the equity to assets ratio was 10.4
percent, and the ratio of nonperforming assets to loans was 0.40 percent.
On May 26, and April 22, 1998, respectively, First American announced the
signing of definitive agreements under which The Middle Tennessee Bank and
Peoples Bank of Dickson will be merged into First American. The Middle Tennessee
Bank is a $232 million bank headquartered in Columbia, Tenn., with seven banking
offices. Peoples Bank is a $135 million bank headquartered in Dickson, Tenn.,
with six banking offices. Both of these middle Tennessee transactions will be
accounted for as pooling-of-interests and are expected to close before year-end
1998.
On May 1, 1998, First American announced the completion of its merger with
Deposit Guaranty Corp. The Deposit Guaranty transaction continues to progress as
originally scheduled with expected systems conversion to be completed in the
fall of 1998. As a result of the merger, First American is now an $18.2 billion
financial services holding company headquartered in Nashville, Tenn., with 335
banking offices and approximately 650 ATMs in Tennessee, Mississippi, Louisiana,
Virginia, Kentucky and Arkansas. The company has additional mortgage offices in
Oklahoma, Nebraska, Texas, Indiana and Iowa. The corporation is the parent
company of First American National Bank, Deposit Guaranty National Bank, First
American Federal Savings Bank in Virginia and First American Enterprises Inc.
The company also owns 98.75 percent of IFC Holdings, Inc. (formerly INVEST).
Through IFC, the company has approximately 1,900 representatives selling mutual
funds, annuities and other investment and insurance products in more than 1,000
investment centers throughout the U.S.
To the extent that statements in this report relate to the plans, objectives or
future performance of First American Corporation, these statements are
considered to be forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are based on
Management's current expectations and the current economic environment. Actual
strategies and results in future periods may differ materially from those
currently expected due to various risks and uncertainties. Additional discussion
of factors affecting First American's business and prospects is contained in the
Company's periodic filings with the Securities and Exchange Commission.
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FIRST AMERICAN CORPORATION / PIONEER BANCSHARES INC.
May 28, 1997
Deal Summary Fact Sheet
STRUCTURE:
-- Pooling of interests
-- Tax-free exchange
-- Definitive agreement signed
TERMS:
-- 1.65 shares of First American common stock for each common share of
Pioneer
-- 19.9% stock option from Pioneer to FATN
PRICING: (Based on closing share prices as of May 27, 1997)
-- FATN closing price (5/27/97): $46.25
-- Purchase price: $297 million
-- Purchase price per share: $76.31
-- Price/Book (1Q98): 2.88x
-- Price/1998 estimated earnings: 27x
-- Price/1999 estimated earnings: 24x
-- Price/1999 estimated earnings (with full synergies): 14x
TIMING:
-- Expected to close in the fourth quarter of 1998
-- Subject to Pioneer shareholder and regulatory approvals
PIONEER 1997 PERFORMANCE:
-- ROA: 1.07%
-- ROE: 10.2%
-- 3-Year Net Income CAGR: 6%
-- Equity Assets: 10.44%
-- Net interest Margin: 4.70%
-- Productivity Ratio: 62.6%
-- Fee Income/Total Revenue: 21%
ACQUISITION RATIONALE:
-- In market transaction
-- Natural fill-in to FATN's Southeast Tennessee market
-- Gives FATN significant presence in the fourth largest market in Tennessee
-- Improved earnings capability through overlay of FATN's superior customer
profitability and distribution management technology
-- 40%+ expected synergies
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Exhibit 99.2
Stock Option Agreement dated as of May 28, 1998 between
Pioneer Bancshares, Inc. and First American Corporation
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STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
as of May 28, 1998, by and between Pioneer Bancshares, Inc., a Delaware
corporation ("Issuer"), and First American Corporation, a Tennessee corporation
("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement and
Plan of Merger, dated as of May 28, 1998 (the "Merger Agreement"), providing
for, among other things, the merger of Issuer with and into Grantee, with
Grantee as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has agreed,
to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of 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 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 forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 748,222 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) of common stock, $0.01 par value per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (subject to adjustment
as set forth herein, the "Purchase Price") equal to $67.50; provided, however,
that in no event shall the number of shares of Issuer Common Stock for which
this Option is exercisable exceed 19.9% of the issued and outstanding Issuer
Common Stock without giving effect to the shares subject to or issued pursuant
to the Option.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined),
as applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, 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, 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;
provided that the Option shall terminate and be of no further force and effect
upon the earliest to occur of (A) the Effective Time, (B) termination of the
Merger Agreement in accordance with the terms thereof prior to the occurrence of
a Purchase Event or a Preliminary Purchase Event (other than a termination of
the Merger Agreement by Grantee pursuant to Section 10.1(b) or Section 10.1(c)
thereof (but only if such termination was a result of a willful breach by
Issuer) (each a "Default Termination")),
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(C) 12 months after a Default Termination (provided, that if, within 12 months
after such termination of the Merger Agreement, a Purchase Event or a
Preliminary Purchase Event shall occur, then notwithstanding anything to the
contrary contained herein (including clause (D) of this sentence), this Option
shall terminate 12 months after the first occurrence of such an event), and (D)
12 months after any termination of the Merger Agreement (other than a Default
Termination) following the occurrence of a Purchase Event or a Preliminary
Purchase Event; provided further, 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 the Grantee. The rights set forth in Section 8 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 subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall
have authorized, 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 defined below). As used
herein, the term Acquisition Transaction shall mean (A) a merger,
consolidation or similar transaction involving Issuer or any of its
Subsidiaries (other than transactions solely between Issuer's
Subsidiaries), (B) except as permitted pursuant to Section 7.1 of the
Merger Agreement, the disposition, by sale, lease, exchange or otherwise,
of Assets of Issuer or any of its Subsidiaries representing in either
case 20% or more of the consolidated assets of Issuer and its
Subsidiaries, or (C) the issuance, sale or other disposition 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 Subsidiaries (any of the foregoing, an "Acquisition
Transaction"); 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 under the Exchange Act), other than a group of which Grantee or
any of its Subsidiaries of Grantee is a member, shall have been formed
which beneficially owns or has the right to acquire beneficial ownership
of, 20% or more of the then-outstanding shares of Issuer Common Stock.
(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 20% or more
of the then-
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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 Merger Agreement at the meeting of such stockholders held
for the purpose of voting on the Merger Agreement, such meeting shall not
have been held or shall have been canceled prior to termination of the
Merger Agreement, 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 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 (A) made, or disclosed
an intention to make, a 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
any federal or state statute or regulation (including a notice filed
under the HSR Act) seeking the Consent to an Acquisition Transaction from
any federal or state governmental or regulatory authority or agency.
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 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 30 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"), subject to
possible extension in accordance with the next sentence. If prior Consent of any
governmental or regulatory agency or authority is required in connection with
such purchase, Issuer shall cooperate with Holder in the filing of the required
notice or application for such Consent and the obtaining of such Consent and the
Closing shall occur immediately following receipt of such Consents (and the
expiration of any mandatory waiting periods).
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 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), (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, claims, charges and
encumbrances of any kind whatsoever and subject to no pre-emptive rights, and
(B) if the Option is exercised in part
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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 MAY 27,
1998. 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 (i) the above legend 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; (ii) the references in the above legend to the provisions of
this Agreement shall be removed by delivery of substitute certificate(s) without
such references if the shares have been sold or transferred in compliance with
the provisions of this Agreement and under circumstances that do not require the
retention of such reference, and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Issuer. This Agreement has been duly executed and
delivered by Issuer.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue, and, at all times from
the date hereof 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, the number of shares of Issuer Common Stock
necessary for Holder 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 or other securities which may be
issued pursuant to Section 7 upon exercise of the Option.
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The shares of Issuer Common Stock to be issued upon due exercise of the
Option, including all additional shares of Issuer Common Stock 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,
including any preemptive rights of any stockholder of Issuer.
6. REPRESENTATIONS AND WARRANTS OF GRANTEE. Grantee hereby represents and
warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the Securities Laws.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(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 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)), 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.
(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
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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 upon the consummation of any
such transaction and upon the terms and conditions set forth herein, Holder
shall receive for each Option Share with respect to which the Option has not
been exercised an amount of consideration in the form of and equal to the per
share amount of consideration that would be received by the holder of one share
of Issuer Common Stock less the Purchase Price (and, in the event of an election
or similar arrangement with respect to the type of consideration to be received
by the holders of Issuer Common Stock, subject to the foregoing, proper
provision shall be made so that Holder would have the same election or similar
rights as would the holder of the number of shares of Issuer Common Stock for
which the Option is then exercisable).
(c) Issuer shall not enter into any agreement of the type
described in Section 7(b) unless the other party thereto consents to provide the
funding required for Issuer to pay the Section 8 Repurchase Consideration.
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 the Option and 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 by Holder 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.
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(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, claims, charges
and encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or Consent of any governmental or regulatory
agency or 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 Consent 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
Consent). If any governmental or regulatory agency or 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 governmental or
regulatory agency or 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 agency or 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 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 subsections 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 (including the OTC
Bulletin Board) as reported by a recognized source chosen by Holder) 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 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), divided by the number of shares of the Issuer Common Stock
outstanding at the time of such sale.
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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 (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act) or control or the right to acquire beneficial ownership or
control, or any "group" (as such term is defined under the Exchange Act) shall
have been formed which shall have acquired beneficial ownership or control or
has the right to acquire beneficial ownership or control, 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.
10. REGISTRATION RIGHTS.
(a) For a period of 24 months, following termination of the Merger
Agreement, Issuer shall, subject to the conditions of subparagraph (c) below, if
requested by any Holder, including Grantee and any permitted transferee
("Selling Holder"), as expeditiously as possible prepare and file a registration
statement under the Securities Laws if 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 Selling Holder upon
exercise of the Option in accordance with the intended method of sale or other
disposition stated by Holder in such request (it being understood and agreed
that any such sale or other disposition shall be effected on a widely
distributed basis so that, upon consummation thereof, no purchaser or transferee
shall beneficially own more than 5% of the shares of Issuer Common Stock then
outstanding), including, without limitation, a "shelf" registration statement
under Rule 415 under the Securities Act or any successor provision, and Issuer
shall use its reasonable best efforts to qualify such shares or other securities
for sale under any applicable state securities laws.
(b) If Issuer at any time after the exercise of the Option
proposes to register any shares of Issuer Common Stock under the Securities Laws
in connection with an underwritten public offering of such Issuer Common Stock,
Issuer will promptly give written notice to Holder of its intention to do so
and, upon the written request of Holder 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
Selling Holder), Issuer will cause all such shares, the holders of which shall
have requested participation in such registration, to be so registered and
included in such underwritten public offering; provided, 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 a dividend reinvestment or similar plan, an employee benefit
plan or a registration filed on Form S-4 or any successor form, or a
registration filed on a form which does not permit registrations of resales;
provided, further, that such election pursuant to clause (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
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<PAGE> 10
registration pursuant to this subparagraph (b), shall be excluded from such
registration, Issuer shall make appropriate allocation of shares to be
registered among Selling Holders and any other person (other than Issuer or any
person exercising demand registration rights in connection with such
registration) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration pro rata in the proportion
that the number of shares requested to be registered by each Selling Holder
bears to the total number of shares requested to be registered by all persons
then desiring to have Issuer Common Stock registered for sale.
(c) Issuer shall use all reasonable efforts to cause each
registration statement referred to in subparagraph (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, that
Issuer may delay any registration of Option Shares required pursuant to
subparagraph (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 Laws
pursuant to subparagraph (a) above:
(i) prior to the earliest of (a) termination of the Merger
Agreement pursuant to Section 10.1 thereof, (b) failure to obtain the
requisite stockholder approval pursuant to Section 9.1(a) of the Merger
Agreement, and (c) a Purchase Event or a Preliminary Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a
registration referred to in subparagraph (b) above pursuant to which the
Selling Holders concerned were afforded the opportunity to register such
shares under the Securities Laws and such shares were registered as
requested; and
(v) unless a request therefor is made to Issuer by Selling
Holders holding at least 15% or more of the aggregate number of Option
Shares then outstanding.
In addition to the foregoing, Issuer shall not be required
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 securities 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, 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) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and
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expenses (including the fees and expenses of counsel), accounting expenses,
legal expenses including the reasonable fees and expenses of one counsel to the
Selling Holders, printing expenses, 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
subparagraph (a) or (b) above (including the related offerings and sales by
Selling Holders) and all other qualifications, notifications or exemptions
pursuant to subparagraph (a) or (b) above. Underwriting discounts and
commissions relating to Option Shares, fees and disbursements of counsel to the
Selling Holders and any other expenses incurred by such Selling Holders in
connection with any such registration shall be borne by such Selling Holders.
(e) In connection with any registration under subparagraph (a) or
(b) above, Issuer hereby indemnifies the Selling Holders, 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 expenses,
losses, claims, damages and liabilities caused by any 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 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 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 Holder, 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
subparagraph (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 subparagraph (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
subparagraph (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 falls to assume the defense
of such
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<PAGE> 12
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 subparagraph (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
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, all selling stockholders and the underwriters from the offering of
the securities and also the relative fault of Issuer, all selling stockholders
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, that in no case shall any Selling Holder 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 subparagraph
(a) or (b) above, Issuer and each Selling Holder (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
subparagraph (e).
(f) 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 Holder in accordance with and to the extent
permitted by any rule or regulation promulgated by the SEC from time to time,
including, without limitation, Rules 144 and 144A. Issuer shall at its expense
provide Holder 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 Laws, or required pursuant to any state securities laws or the rules
of any stock exchange.
(g) 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 Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
11. QUOTATION; LISTING. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the Nasdaq National Market or any securities exchange or
any automated quotations system maintained by a
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<PAGE> 13
self-regulatory organization, 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 any securities
exchange or any automated quotations system maintained by a self-regulatory
organization and will use its reasonable efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
12. 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.
13. MISCELLANEOUS.
(A) EXPENSES. Except as otherwise provided in Section 11, 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 documents and
instruments referred to herein and therein, between Grantee and Issuer (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 (other than any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 13(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 a federal or state
governmental or regulatory agency or 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 agency determines that the Option does not permit Holder to acquire,
or
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<PAGE> 14
does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in Sections 3 and 8 (as adjusted pursuant to Section
7), 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 Delaware 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), mailed by registered or certified mail (return receipt
requested) or delivered by reliable overnight delivery service to the parties at
the addresses set forth in the Merger Agreement(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 Grantee may assign this
Agreement to a wholly owned Subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
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.
(I) FURTHER ASSURANCES. In the event of any exercise of the Option
by Holder, Issuer and 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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<PAGE> 15
(K) CONFIDENTIALITY AGREEMENT. The parties hereto agree that this
Agreement supersedes any provision of the Confidentiality Agreement that could
be interpreted to preclude the exercise of any rights or the fulfillment of any
obligations under this Agreement, and that none of the provisions included in
the Confidentiality Agreement will act to preclude Holder from exercising the
Option or exercising any other rights under this Agreement or act to preclude
Issuer from fulfilling any of its obligations under this Agreement.
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<PAGE> 16
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.
ATTEST: PIONEER BANCSHARES, INC.
By: /s/ Ralph M. West, Jr. By: /s/ Rodger B. Holley
-------------------------- --------------------------
Secretary President
[CORPORATE SEAL]
ATTEST: FIRST AMERICAN CORPORATION
By: /s/ Mary Neil Price By: /s/ Dale W. Polley
-------------------------- --------------------------
Secretary President
[CORPORATE SEAL]
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