The JP Morgan-Bear Stearns Option Agreement

Remember Exhibit A, the stock option agreement between JP Morgan and Bear Stearns which no one made public? Well, it's finally been filed with the SEC. And it says exactly what everybody's been saying that it says, only in legalese rather than English:

1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option (the "Option") to purchase, subject to the terms hereof, up to 29,000,000 fully paid and nonassessable shares of Issuer's Common Stock, par value $1.00 per share ("Common Stock"), at a price of $2.00 per share (the "Option Price"); provided, however, that in no event shall the number of shares of Common Stock for which this Option is exercisable exceed 19.9% of the Issuer's issued and outstanding shares of Common Stock without giving effect to any shares subject to or issued pursuant to the Option.

One thing I haven't seen reported: in order for JP Morgan to be able to exercise its option, it's not enough for shareholders simply to vote against the deal. There also needs to be a Subsequent Triggering Event, which is essentially that someone else has bought at least 20% of Bear Stearns. Which means that if shareholders vote no without a better offer on the table, JP Morgan can't automatically hold a revote in the knowledge that it has an extra 19.9% stake.