Exhibit 10.2
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated May 5, 2011, between Green Bankshares, Inc., a
corporation organized under the laws of the State of Tennessee (“Issuer”), and
North American Financial Holdings, Inc., a Delaware corporation (“Grantee”).
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Investment Agreement of even
date herewith (the “Investment Agreement”), which agreement has been executed by
the parties hereto in connection with this Stock Option Agreement (the
“Agreement”)
WHEREAS, as a condition to Grantee’s entering into the Investment Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements set forth herein and in the Investment Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option (the
“Option”) to purchase, subject to the terms hereof, up to 2,628,183 fully paid
and nonassessable shares of Issuer’s Common Stock, par value $2.00 per share
(“Common Stock”), at a price per share equal to the closing price on the Nasdaq
Global Select Market for shares of Common Stock on the first trading day
following the date of the Investment Agreement (the “Option Price”); provided,
however, that in no event shall the number of shares of Common Stock for which
this Option is exercisable exceed 19.9% of the Issuer’s issued and outstanding
shares of Common Stock without giving effect to any shares subject to or issued
pursuant to the Option. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are either
(i) issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement) or (ii) redeemed, repurchased, retired
or otherwise cease to be outstanding after the date of this Agreement, the
number of shares of Common Stock subject to the Option shall be increased or
decreased, as appropriate, so that, after such issuance, such number equals
19.9% of the number of shares of Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to the Option.
Nothing contained in this Section 1(b) or elsewhere in this Agreement shall be
deemed to authorize Issuer or Grantee to breach any provision of the Investment
Agreement.

 

 

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2. (a) The Holder (as hereinafter defined) may exercise the Option, in whole or
part, and from time to time, if, but only if, both an Initial Triggering Event
(as hereinafter defined) and a Subsequent Triggering Event (as hereinafter
defined) shall have occurred prior to the occurrence of an Exercise Termination
Event (as hereinafter defined), provided that the Holder shall have sent the
written notice of such exercise (as provided in subsection (g) of this
Section 2) within 180 days following such Subsequent Triggering Event.
(b) Each of the following shall be an “Exercise Termination Event”: (i) the
occurrence of the Closing (as defined in the Investment Agreement);
(ii) termination of the Investment Agreement in accordance with the provisions
thereof (other than a termination by Grantee pursuant to Section 5.1(f) or
5.1(g) of the Investment Agreement) (unless the breach by Issuer giving rise to
such right of termination pursuant to Section 5.1(f) is non-volitional)) if such
termination occurs prior to the occurrence of an Initial Triggering Event; and
(iii) the passage of 18 months after termination of the Investment Agreement if
such termination follows the occurrence of an Initial Triggering Event or is a
termination by Grantee pursuant to Section 5.1(f) or 5.1(g) of the Investment
Agreement (unless the breach by Issuer giving rise to such right of termination
pursuant to Section 5.1(f) is non-volitional).
(c) The term “Holder” shall mean the holder or holders of the Option.
(d) The term “Initial Triggering Event” shall mean any of the following events
or transactions occurring on or after the date hereof:
(i) Issuer or any of its subsidiaries (each an “Issuer Subsidiary”), without
having received Grantee’s prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as hereinafter defined) with
any person (the term “person” for purposes of this Agreement having the meaning
assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the “1934 Act”), and the rules and regulations thereunder)
other than Grantee or any of its subsidiaries (each a “Grantee Subsidiary”) or
the Board of Directors of Issuer shall have recommended that the stockholders of
Issuer approve or accept any Acquisition Transaction with any person other than
Grantee or a subsidiary of Grantee. For purposes of this Agreement, “Acquisition
Transaction” shall mean (w) a merger, consolidation or share exchange, or any
similar transaction, involving Issuer or any Significant Subsidiary (as defined
in Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the “SEC”)) of Issuer, (x) a purchase, lease or other acquisition or
assumption of all or a substantial portion of the assets or deposits of Issuer
or of any Significant Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer, or (z) any
substantially similar transaction; provided, however, that in no event shall any
merger, consolidation, purchase or similar transaction that is not entered into
in violation of the terms of the Investment Agreement and that involves only
(i) the Issuer and one or more of its wholly owned subsidiaries, (ii) any two or
more of such wholly owned subsidiaries, or (iii) any Subsidiary of the Issuer
and the Grantee or a Grantee Subsidiary be deemed to be an Acquisition
Transaction;

 

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(ii) Issuer or any Issuer Subsidiary, without having received Grantee’s prior
written consent, shall have authorized, recommended, proposed or publicly
announced its intention to authorize, recommend or propose, to engage in an
Acquisition Transaction with any person other than Grantee or a Grantee
Subsidiary, or the Board of Directors of Issuer shall have publicly withdrawn or
modified, or publicly announced its intention to withdraw or modify, in any
manner adverse to Grantee, its recommendation that the stockholders of Issuer
approve the transactions contemplated by the Investment Agreement;
(iii) Any person other than Grantee, any Grantee Subsidiary or any Issuer
Subsidiary acting in a fiduciary capacity in the ordinary course of its business
shall have acquired beneficial ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares of Common Stock (the term
“beneficial ownership” for purposes of this Agreement having the meaning
assigned thereto in Section 13(d) of the 1934 Act, and the rules and regulations
thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall have made a
bona fide proposal to Issuer or its stockholders that is public or becomes the
subject of public disclosure to engage in an Acquisition Transaction;
(v) After the receipt by Issuer or its stockholders of any bona fide inquiry or
proposal (or the bona fide indication of any intention to propose) from any
person other than Grantee or any Grantee Subsidiary to engage in an Acquisition
Transaction, Issuer shall have breached any covenant or obligation contained in
the Investment Agreement and such breach (x) would entitle Grantee to terminate
the Investment Agreement and (y) shall not have been cured prior to the Notice
Date (as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary, other than in
connection with a transaction to which Grantee has given its prior written
consent, shall have filed an application or notice with the Federal Reserve, or
other federal or state bank regulatory authority, which application or notice
has been accepted for processing, for approval to engage in an Acquisition
Transaction.
(e) The term “Subsequent Triggering Event” shall mean either of the following
events or transactions occurring on or after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20% or more of the
then outstanding shares of Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in paragraph
(i) of subsection (d) of this Section 2, except that the percentage referred to
in clause (y) shall be 20%.
(f) Issuer shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event of which it has
knowledge, it being understood that the giving of such notice by Issuer shall
not be a condition to the right of the Holder to exercise the Option.

 

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(g) In the event the Holder is entitled to and wishes to exercise the Option, it
shall send to Issuer a written notice (the date of which being herein referred
to as the “Notice Date”) specifying (i) the total number of shares it will
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 60 business days from the Notice Date for the
closing of such purchase (the “Closing Date”); provided that if prior
notification to or approval of the Federal Reserve or any other regulatory
agency is required in connection with such purchase, the Holder shall as soon as
reasonably practicable file the required notice or application for approval and
shall expeditiously process the same and the period of time that otherwise would
run pursuant to this sentence shall run instead from the date on which any
required notification periods have expired or been terminated or such approvals
have been obtained and any requisite waiting period or periods shall have
passed. Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.
(h) At the closing referred to in subsection (g) of this Section 2, the Holder
shall pay to Issuer the aggregate purchase price for the shares of Common Stock
purchased pursuant to the exercise of the Option in immediately available funds
by wire transfer to a bank account designated by Issuer, provided that failure
or refusal of Issuer to designate such a bank account shall not preclude the
Holder from exercising the Option.
(i) At such closing, simultaneously with the delivery by the Holder of
immediately available funds as provided in subsection (h) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder, and
the Holder shall deliver to Issuer this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(j) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
“The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the Securities Act of 1933, as
amended. A copy of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon receipt by Issuer
of a written request therefor.”
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the “1933 Act”), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificate(s) shall bear any other legend as may
be required by law.

 

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(k) Upon the giving by the Holder to Issuer of the written notice of exercise of
the Option provided for under subsection (g) of this Section 2 and the tender by
the Holder of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation,
issuance and delivery of stock certificates under this Section 2 in the name of
the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from preemptive
rights, sufficient authorized but unissued shares of Common Stock so that the
Option may be exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible securities and other
rights to purchase Common Stock; (ii) that it will not, by charter amendment or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act, avoid or seek to avoid the observance or performance
of any of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) that it will promptly take all action as may from
time to time be required (including (x) complying with all premerger
notification, reporting and waiting period requirements specified in 15 U.S.C. §
18a and regulations promulgated thereunder and (y) in the event, under the Bank
Holding Company Act of 1956, as amended (the “BHCA”), or the Change in Bank
Control Act of 1978, as amended, or any state banking law, prior approval of or
notice to the Federal Reserve or to any state or other regulatory authority is
necessary before the Option may be exercised, cooperating fully with the Holder
in preparing such applications or notices and providing such information to the
Federal Reserve or such other regulatory authority as they may require) in order
to permit the Holder to exercise the Option and Issuer duly and effectively to
issue shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms “Agreement” and “Option” as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged and the term “Grantee”, with respect to any such Stock
Option Agreement and related Option, shall include the Holder of such Option
resulting from such exchange. 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.

 

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5. In addition to the adjustment in the number of shares of Common Stock that
are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5. In the event of any change in, or distributions
in respect of, the Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions, conversions, exchanges
of shares, distributions on or in respect of the Common Stock that would be
prohibited under the terms of the Investment Agreement, or the like, the type
and number of shares of Common Stock purchasable upon exercise hereof and the
Option Price shall be equitably and proportionally adjusted in such manner as
shall fully preserve the economic benefits provided hereunder and proper
provision shall be made in any agreement governing any such transaction to
provide for such proper adjustment and the full satisfaction of the Issuer’s
obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to an
Exercise Termination Event, Issuer shall, at the request of Grantee delivered
within 180 days of such Subsequent Triggering Event (whether on its own behalf
or on behalf of any subsequent holder of this Option (or part thereof) or of any
of the shares of Common Stock issued pursuant hereto), promptly prepare, file
and keep current a shelf registration statement under the 1933 Act covering this
Option and any shares issued and issuable pursuant to this Option and shall use
its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option (“Option Shares”) in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder’s
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practicable and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in secondary
offering underwriting agreements for the Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement.

 

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7. (a) In the event of a Repurchase Event (as defined below), (i) following a
request of the Holder, delivered prior to an Exercise Termination Event, Issuer
(or any successor thereto) shall repurchase the Option from the Holder
immediately prior to the Repurchase Event (or, as requested by the Holder, after
the Repurchase Event) at a price (the “Option Repurchase Price”) equal to the
product of the number of shares for which this Option may then be exercised
multiplied by the amount by which (A) the Market/Offer Price (as defined below)
exceeds (B) the Option Price, and (ii) at the request of the owner of Option
Shares from time to time (the “Owner”), delivered prior to an Exercise
Termination Event and within 90 days after the occurrence of a Repurchase Event,
Issuer (or any successor thereto) shall repurchase immediately after such
request from the Owner such number of the Option Shares from the Owner as the
Owner shall designate at a price (the “Option Share Repurchase Price”) equal to
the Market/Offer Price multiplied by the number of Option Shares so designated.
The term “Market/Offer Price” shall mean the highest of (1) the price per share
of Common Stock at which a tender offer or exchange offer therefor has been
made, (2) the price per share of Common Stock to be paid by any third party
pursuant to an agreement with Issuer, (3) the highest closing price for shares
of Common Stock within the six-month period immediately preceding the date the
Holder gives notice of the required repurchase of this Option or the Owner gives
notice of the required repurchase of Option Shares, as the case may be, and
(4) in the event of a sale of all or a substantial portion of Issuer’s assets
(other than to Grantee or a Grantee Subsidiary), the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Issuer as determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to the Issuer, divided by the number of shares of Common Stock of
Issuer outstanding at the time of such sale. In determining the Market/Offer
Price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder or Owner,
as the case may be, and reasonably acceptable to the Issuer.
(b) The Holder or the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office,
this Agreement or certificates for Option Shares, as applicable, accompanied by
a written notice or notices stating that the Holder or the Owner, as the case
may be, elects to require Issuer to repurchase this Option and/or the Option
Shares in accordance with the provisions of this Section 7. Within the later to
occur of (i) five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto and (ii) the time that is immediately prior to the
occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered
to the Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof, if any, that Issuer is not
then prohibited under applicable law, regulation or formal or informal
regulatory agreement or enforcement action from so delivering.

 

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(c) To the extent that Issuer is prohibited under applicable law, regulation or
formal or informal regulatory agreement or enforcement action from repurchasing
the Option and/or the Option Shares to the full extent requested by the Holder
or Owner, as the case may be, Issuer shall, following its receipt of a written
notice required by Section 7(b) of this Agreement, immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law, regulation
or formal or informal regulatory agreement or enforcement action from delivering
to the Holder and/or the Owner, as appropriate, the Option Repurchase Price and
the Option Share Repurchase Price, respectively, to said full extent (and Issuer
hereby undertakes to use its best efforts to obtain all required regulatory and
legal approvals and to file any required notices, in each case as promptly as
practicable in order to accomplish such repurchase), the Holder or Owner may
revoke its notice of repurchase of the Option or the Option Shares either in
whole or to the extent of the prohibition, whereupon, in the latter case, Issuer
shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share Repurchase Price that
Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Stock Option Agreement evidencing the right of
the Holder to purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the surrendered Stock
Option Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and the denominator
of which is the Option Repurchase Price, or (B) to the Owner, a certificate for
the Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a “Repurchase Event” shall be deemed to have
occurred (i) upon the consummation of an Acquisition Transaction with respect to
Issuer (and not solely involving Issuer and/or one or more subsidiaries of
Issuer) (except that the percentage referred to in clause (y) of the definition
thereof shall be 50%) or (ii) upon the acquisition by any person of beneficial
ownership of 50% or more of the then outstanding shares of Common Stock.
8. (a) In the event that, prior to an Exercise Termination Event, Issuer shall
enter into an agreement (i) to consolidate with or merge into any person, other
than Grantee or a Grantee Subsidiary or controlled Affiliate of Grantee, and
shall not be the continuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or a Grantee Subsidiary,
to merge into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then outstanding shares of
Common Stock shall be changed into or exchanged for stock or other securities of
any other person or cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of the outstanding
voting shares and voting share equivalents of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its assets to any person,
other than Grantee or a Grantee Subsidiary or controlled Affiliate of Grantee,
then, and in each such case, the agreement governing such transaction shall make
proper provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option (the “Substitute Option”), at the election of
the Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or
(y) any person that controls the Acquiring Corporation.

 

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(b) The following terms have the meanings indicated:
(A) “Acquiring Corporation” shall mean (i) the continuing or surviving person of
a consolidation or merger with Issuer (if other than Issuer), (ii) Issuer in a
merger in which Issuer is the continuing or surviving person, and (iii) the
transferee of all or substantially all of Issuer’s assets.
(B) “Assigned Value” shall mean the Market/Offer Price, as defined in Section 7.
(C) “Average Price” shall mean the average closing price of a share of the
Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to a share
of common stock issued by the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may elect.
(D) “Substitute Common Stock” shall mean the common stock issued by the issuer
of the Substitute Option upon exercise of the Substitute Option.
(c) The Substitute Option shall have the same terms as the Option, provided,
that (1) the exercise price therefor and number of shares subject thereto shall
be as set forth in this Section 8 and the repurchase rights relating thereto
shall be as set forth in Section 9; (2) if a Subsequent Triggering Event shall
have occurred prior to or in connection with the issuance of such Substitute
Option, the Substitute Option shall be exercisable immediately upon issuance
without the occurrence of a further Subsequent Triggering Event; and (3) if the
terms of the Substitute Option cannot, for legal reasons, be the same as the
Option, such terms shall be as similar as possible and in no event less
advantageous to the Holder. The issuer of the Substitute Option shall also enter
into an agreement with the then Holder or Holders of the Substitute Option in
substantially the same form as this Agreement, which shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.

 

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(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the “Substitute Option Issuer”)
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause
(e) over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder and
reasonably acceptable to the Issuer.
(f) Issuer shall not enter into any transaction described in subsection (a) of
this Section 8 unless the Acquiring Corporation and any person that controls the
Acquiring Corporation assume in writing all the obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the “Substitute
Option Holder”) delivered prior to any Exercise Termination Event with respect
to the Substitute Option, the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the “Substitute
Option Repurchase Price”) equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised, and at the request of the owner
(the “Substitute Share Owner”) of shares of Substitute Common Stock (the
“Substitute Shares”), the Substitute Option Issuer shall repurchase immediately
after such request from the Substitute Share Owner such number of the Substitute
Shares from the Substitute Share Owner as the Substitute Share Owner shall
designate at a price (the “Substitute Share Repurchase Price”) equal to the
Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term “Highest Closing Price” shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the case may
be, may exercise its respective right to require the Substitute Option Issuer to
repurchase the Substitute Option and the Substitute Shares pursuant to this
Section 9 by surrendering for such purpose to the Substitute Option Issuer, at
its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law, regulation or formal or
informal regulatory agreement or enforcement action from so delivering.

 

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(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law, regulation or formal or informal regulatory agreement or
enforcement action from repurchasing the Substitute Option and/or the Substitute
Shares in part or to the full extent requested by the Substitute Option Holder
or Substitute Share Owner, as the case may be, the Substitute Option Issuer
following a request for repurchase pursuant to this Section 9 shall immediately
so notify the Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law, regulation or formal or informal regulatory agreement or
enforcement action from delivering to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the Substitute Option Repurchase Price
and the Substitute Share Repurchase Price, respectively, in said full extent
(and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as
practicable, in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, the Substitute Option Issuer
shall promptly (i) deliver to the Substitute Option Holder or Substitute Share
Owner, as appropriate, that portion of the Substitute Option Repurchase Price or
the Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day or 180-day periods for exercise of certain rights under
Sections 2, 6, and 7 shall be extended: (i) to the extent necessary to obtain
all regulatory approvals for the exercise of such rights and for the expiration
of all statutory waiting periods; (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise; and
(iii) during the pendency of any temporary restraining order, injunction or
other legal bar to exercise of such rights.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Issuer and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Issuer.

 

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(b) Issuer has taken all necessary corporate action to authorize and reserve and
to permit it to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms will have reserved
for issuance upon the exercise of the Option, that number of shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and from
time to time issuable hereunder, and all such shares, upon issuance pursuant
hereto, will be duly authorized, validly issued, fully paid, nonassessable, and
will be delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(c) The Board of Directors of Issuer has unanimously approved this Agreement and
the transactions contemplated hereby (including by reserving shares for issuance
of shares of Common Stock on exercise of the Option) and subject to the approval
of the Shareholder Proposal (as defined in the “Investment Agreement” but other
than the proposal set forth in clause (1)(iii) of such definition) taken any
other action as required to render inapplicable to such agreement and
transactions any anti-takeover or similar provisions of the Charter, and its
bylaws and the requirements of any “moratorium,” “control share,” “fair price,”
“affiliate transaction,” “business combination” or other antitakeover laws and
regulations of any state, including the Tennessee Business Corporation Act.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter into this
Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Grantee.
This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other securities
acquired by Grantee upon exercise of the Option will not be, acquired with a
view to the public distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from registration under
the 1933 Act.
13. Neither of the parties hereto may assign any of its rights or obligations
under this Agreement or the Option created hereunder to any other person,
without the express written consent of the other party, except that in the event
a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the Federal Reserve
approves an application by Grantee under the BHCA to acquire the shares of
Common Stock subject to the

 

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Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee’s behalf, or (iv) any other manner approved by the Federal Reserve. Upon
any such assignment, the transferee shall be deemed to be the “Grantee” for
purposes of the Option so transferred and any partial transfer shall be effected
by an exchange of the Option in accordance with Section 4 hereof.
14. Each of Grantee and Issuer will use its reasonable best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the NASDAQ upon official notice of
issuance and applying to the Federal Reserve under the BHCA for approval to
acquire the shares issuable hereunder, but Grantee shall not be obligated to
apply to state banking authorities for approval to acquire the shares of Common
Stock issuable hereunder until such time, if ever, as it deems appropriate to do
so.
15. (a) Grantee may, at any time during which Issuer would be required to
repurchase the Option or any Option Shares pursuant to Section 7 upon proper
request or notice, surrender the Option (together with any Option Shares issued
to and then owned by Grantee) to Issuer in exchange for a cash fee equal to the
Surrender Price (as defined below); provided, however, that Grantee may not
exercise its rights pursuant to this Section 15 if Issuer has repurchased the
Option (or any portion thereof) or any Option Shares pursuant to Section 7. The
“Surrender Price” shall be equal to (i) $2,500,000, plus (ii) if applicable, the
aggregate purchase price previously paid pursuant hereto by Grantee with respect
to any Option Shares, minus (iii) if applicable, the sum of (A) the excess of
(1) the net cash amounts, if any, received by Grantee pursuant to the arms’
length sale of Option Shares (or any other securities into which such Option
Shares were converted or exchanged) to any party not affiliated with Grantee,
over (2) the aggregate purchase price previously paid pursuant hereto by Grantee
with respect to such Option Shares and (B) the net cash amounts, if any,
received by Grantee pursuant to an arms’ length sale of a portion of the Option
to any party not affiliated with Grantee.
(b) Grantee may exercise its right to surrender the Option and any Option Shares
pursuant to this Section 15 by surrendering to Issuer, at its principal office,
this Agreement together with certificates for Option Shares, if any, accompanied
by a written notice stating (i) that Grantee elects to surrender the Option and
Option Shares, if any, in accordance with the provisions of this Section 15 and
(ii) the Surrender Price. The Surrender Price shall be payable in immediately
available funds on or before the second business day following receipt of such
notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law, regulation or
formal or informal regulatory agreement or enforcement action from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that Issuer is no longer prohibited from
paying, within five business days after the date on which Issuer is no longer so
prohibited, provided, however, that if Issuer at any time after delivery of a
notice of

 

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surrender pursuant to paragraph (b) of this Section 15 is prohibited under
applicable law, regulation or formal or informal regulatory agreement or
enforcement action from paying to Grantee the Surrender Price in full (i) Issuer
shall (A) use its reasonable best efforts to obtain all required regulatory and
legal approvals and to file any required notices as promptly as practicable in
order to make such payments, (B) within five days of the submission or receipt
of any documents relating to any such regulatory and legal approvals, provide
Grantee with copies of the same, and (C) keep Grantee advised of both the status
of any such request for regulatory and legal approvals, as well as any
discussions with any relevant regulatory or other third party reasonably related
to the same and (ii) Grantee may revoke such notice of surrender by delivery of
a notice of revocation to Issuer and, upon delivery of such notice of
revocation, the Exercise Termination Date shall be extended to a date six months
from the date on which the Exercise Termination Date would have occurred if not
for the provisions of this Section 15(c) (during which period Grantee may
exercise any of its rights hereunder, including any and all rights pursuant to
this Section 15).
(d) Grantee shall have rights substantially identical to those set forth in
paragraphs (a), (b) and (c) of this Section 15 with respect to the Substitute
Option and the Substitute Option Issuer during any period in which the
Substitute Option Issuer would be required to repurchase the Substitute Option
pursuant to Section 9.
16. (a) Notwithstanding any other provision of this Agreement, in no event shall
the Grantee’s Total Profit (as hereinafter defined) exceed $8,000,000 and, if it
otherwise would exceed such amount, the Grantee, at its sole election, shall
either (i) reduce the number of shares of Common Stock subject to this Option,
(ii) deliver to Issuer for cancellation Option Shares previously purchased by
Grantee, (iii) pay cash to Issuer, or (iv) any combination thereof, so that
Grantee’s actually realized Total Profit shall not exceed $8,000,000 after
taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option may not
be exercised for a number of shares as would, as of the date of exercise, result
in a Notional Total Profit (as defined below) of more than $8,000,000; provided
that nothing in this sentence shall restrict any exercise of the Option
permitted hereby on any subsequent date.
(c) As used herein, the term “Total Profit” shall mean the aggregate amount
(before taxes) of the following: (i) the amount received by Grantee pursuant to
Issuer’s repurchase of the Option (or any portion thereof) pursuant to
Section 7, (ii) (x) the amount received by Grantee pursuant to Issuer’s
repurchase of Option Shares pursuant to Section 7, less (y) the Grantee’s
purchase price for such Option Shares, (iii) (x) the net cash amounts received
by Grantee pursuant to the sale of Option Shares (or any other securities into
which such Option Shares are converted or exchanged) to any unaffiliated party,
less (y) the Grantee’s purchase price of such Option Shares, (iv) any amounts
received by Grantee on the transfer of the Option (or any portion thereof) to
any unaffiliated party, and (v) any amount equivalent to the foregoing with
respect to the Substitute Option.

 

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(d) As used herein, the term “Notional Total Profit” with respect to any number
of shares as to which Grantee may propose to exercise the Option shall be the
Total Profit, determined as of the date of such proposed exercise assuming
(1) that the Option were exercised on such date for such number of shares and
(2) that such shares, together with all other Option Shares held by Grantee and
its affiliates as of such date, were sold for cash at the closing market price
for the Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions).
17. The parties hereto acknowledge that damages would be an inadequate remedy
for a breach of this Agreement by either party hereto and that the obligations
of the parties hereto shall be enforceable by either party hereto through
injunctive or other equitable relief.
18. If any term, provision, covenant or restriction contained in this Agreement
is held by a court or a federal or state regulatory agency of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions and covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be affected, impaired or
invalidated. If for any reason such court or regulatory agency determines that
the Holder is not permitted to acquire, or Issuer is not permitted to repurchase
pursuant to Section 7 (or the Substitute Issuer to repurchase pursuant to
Section 9), the full number of shares of Common Stock (or Substitute Common
Stock) provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
19. All notices, requests, claims, demands and other communications hereunder
shall be deemed to have been duly given when delivered in person, by facsimile,
or by registered or certified mail (postage prepaid, return receipt requested)
at the respective addresses of the parties set forth in the Investment
Agreement.
20. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to any applicable conflicts of law
principles (except to the extent that mandatory provisions of federal or state
law apply).
21. This Agreement may be executed in counterparts (including by facsimile and
email), each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
22. Except as otherwise expressly provided herein, each of the parties hereto
shall bear and pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
23. Except as otherwise expressly provided herein or in the Investment
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.

 

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24. Capitalized terms used in this Agreement and not defined herein shall have
the meanings assigned thereto in the Investment Agreement.
[Signature page follows]

 

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
on its behalf by its officers thereunto duly authorized, all as of the date
first above written.

            GREEN BANKSHARES, INC.
   (Issuer)
      By:   /s/ Stephen M. Rownd       Name:  Stephen M. Rownd     
Title:    Chairman and CEO        NORTH AMERICAN FINANCIAL HOLDINGS, INC.
   (Grantee)
    By:   /s/ Christopher G. Marshall       Name:  Christopher G. Marshall     
Title:    EVP, CFO     

[Signature Page to Stock Option Agreement]