1
EXHIBIT 10.1
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of October 27, 1997 (the
"Agreement"), between CFX Corporation, a New Hampshire corporation ("Issuer"),
and Peoples Heritage Financial Group, Inc., a Maine corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of October 27, 1997 (the "Plan"), providing for, among other
things, the merger of Issuer with and into Grantee (the "Merger"), with Grantee
as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Plan, Grantee has required that Issuer agree, and Issuer has agreed, to grant
to Grantee the Option (as hereinafter defined);
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not
defined herein shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set
forth herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase up to 4,793,062 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, par value .66 2/3 per
share ("Issuer Common Stock"), of Issuer at a purchase price per Option Share
(the "Purchase Price") of $22.69, provided, however, that in no event shall the
number of Option Shares for which the Option is exercisable exceed 19.9% of the
issued and outstanding shares of Issuer Common Stock without giving effect to
any shares subject to or issued pursuant to the Option.
3. Exercise of Option.
(a) The Holder (as hereinafter defined), may exercise the Option,
in whole or in part, at any time and from time to time, if, but only if, both a
Preliminary Purchase Event (as hereinafter defined) and a Purchase Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided, however, that if the
Option cannot be exercised on any day because of any injunction, order or
similar restraint issued by a court of competent jurisdiction, the period
during which the Option may be exercised shall be extended so that the Option
shall expire no earlier than on the 10th business day after such injunction,
order or restraint shall have been dissolved
2
or when such injunction, order or restraint shall have become permanent and no
longer subject to appeal, as the case may be. Each of the following shall be
an "Exercise Termination Event": (A) the Effective Time (as defined in the
Plan) of the Merger, (B) termination of the Plan in accordance with the terms
thereof prior to the occurrence of a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section 7.1(b)(i) (a "Default
Termination") and (C) 12 months after termination of the Plan following the
occurrence of a Preliminary Purchase Event or pursuant to a Default
Termination, provided that if a Preliminary Purchase Event continues or occurs
beyond such termination and prior to the passage of such 12-month period, the
Exercise Termination Event shall be 12 months from the expiration of the last
Preliminary Purchase Event to expire but in no event more than 18 months after
such termination. Notwithstanding anything to the contrary contained herein,
the Option may not be exercised (nor may any of Grantee's rights under Sections
8, 9, 10 or 14(h) hereof be exercised) at any time when Grantee shall be in
willful breach of any of its covenants or agreements contained in the Plan
under circumstances that would entitle Issuer to terminate the Plan. The term
"Holder" shall mean the holder or holders of the Option from time to time, and
which is initially Grantee.
(b) As used herein, a "Preliminary Purchase Event" means any of
the following events:
(i) Without Grantee's prior written consent, Issuer or
any of its Subsidiaries shall have authorized, recommended or
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 engage in an
Acquisition Transaction. For purposes of this Agreement, "Acquisition
Transaction" shall mean (A) a merger, consolidation or similar
transaction involving Issuer or any of its Subsidiaries (other than
internal mergers, reorganizations, consolidations or dissolutions
involving only existing Subsidiaries effected in accordance with the
Plan), (B) the purchase, lease or other acquisition of all or a
substantial portion of the consolidated assets or consolidated
deposits of Issuer and its Subsidiaries or (C) a purchase or other
acquisition (including by way of merger, consolidation, share
exchange, Tender Offer or Exchange Offer (as such terms are
hereinafter defined) or otherwise) of securities representing 10% or
more of the voting power of Issuer or any of its Subsidiaries (any of
the foregoing an "Acquisition Transaction");
(ii) 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 10% or
more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" and an "Exchange
Offer," respectively);
2
3
(iii) (A) the holders of Issuer Common Stock shall not have
approved the Plan at the meeting of such stockholders held for the
purpose of voting on the Plan, (B) such meeting shall not have been
held or shall have been canceled prior to termination of the Plan or
(C) Issuer's Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Plan, in each case after it shall have
been publicly announced or become publicly known that any person
(other than Grantee or any Subsidiary of Grantee) shall have (x) made,
or disclosed an intention to make, a proposal to engage in an
Acquisition Transaction, (y) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an
Exchange Offer or (z) filed an application (or given notice), whether
in draft or final form, under the Bank Holding Company Act of 1956, as
amended, the Bank Merger Act, as amended, the Change in Bank Control
Act of 1978, as amended, or any other applicable federal or state
banking law for approval to engage in an Acquisition Transaction; or
(iv) Issuer shall have breached any covenant or obligation
contained in the Plan and such breach would entitle Grantee to
terminate the Plan under Section 7.1(b)(i) thereof (without regard to
the cure period provided for therein unless such cure is promptly
effected without jeopardizing consummation of the Merger pursuant to
the terms of the Plan) after (x) a proposal is made by any person
(other than Grantee or any Subsidiary of Grantee) to Issuer or its
stockholders to engage in an Acquisition Transaction, (y) any person
(other than Grantee or any Subsidiary of Grantee) states its intention
to Issuer or its stockholders to make a proposal to engage in an
Acquisition Transaction if the Plan terminates or (z) any person
(other than Grantee or any Subsidiary of Grantee) shall have filed an
application or notice with any Governmental Entity to engage in an
Acquisition Transaction.
(c) As used herein, a "Purchase Event" means any of the following
events:
(i) The occurrence of the Preliminary Purchase Event
described in clause (i) of subsection (b) of this Section 3, except
that the percentage referred to in clause (C) shall be 25%; or
(ii) any person (other than Grantee or any Subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) of or the
right to acquire beneficial ownership of, or any "group" (as such term
is defined in Section 13(d)(3) of the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then outstanding shares of Issuer
Common Stock.
As used in this Agreement, "person" shall have the meaning specified
in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
3
4
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Preliminary Purchase Event or Purchase Event, it being
understood that the giving of such notice by Issuer shall not be a condition to
the right of Holder to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it shall
send to Issuer a written notice (the date of which being herein referred to as
the "Notice Date") specifying (i) the total number of Option Shares it intends
to purchase pursuant to such exercise, and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing (the "Closing") of such purchase (the "Closing Date"), provided
that if prior notification to or approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") or any other Governmental
Entity is required in connection with such purchase, Holder shall promptly file
the required notice or application for approval and shall expeditiously process
the same (and each party shall cooperate with the other in the filing of any
such notice or application and the obtaining of any such approval) 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.
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, provided that failure or
refusal of Issuer to designate such a bank account shall not preclude Holder
from exercising the Option, and (ii) present and surrender this Agreement to
Issuer at the address of Issuer specified in Section 14(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 preemptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of
the shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or the provisions of this Agreement.
(c) In addition to any other legend that may be 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:
4
5
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 OCTOBER 27, 1997. A COPY
OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of the
Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under Section 3(e), the tender of the
applicable purchase price in immediately available funds and the tender of this
Agreement to Issuer, Holder shall be deemed to be the holder of record of the
shares of Issuer Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Issuer Common Stock shall not then be actually
delivered to Holder. Issuer shall pay all expenses, and any and all United
States federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 4 in the name of Holder or its assignee, transferee or designee.
(e) Issuer agrees (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares
of Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or notices and
providing such information to such Governmental Entity as it may require) in
order to permit Holder to exercise the Option and Issuer duly and effectively
to issue shares of Issuer Common Stock pursuant hereto and (iv) promptly to
take all action provided herein to protect the rights of Holder against
dilution.
5. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee (and Holder, if different than Grantee) as
follows:
5
6
(a) Due Authorization. Issuer has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Issuer, and this Agreement has
been duly executed and delivered by Issuer.
(b) No Violations. The execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby and compliance by
Issuer with any of the provisions hereof will not (i) conflict with or result
in a breach of any provision of its Articles of Incorporation or Bylaws or a
default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, debenture, mortgage, indenture, license, material agreement or other
material instrument or obligation to which Issuer is a party, or by which it or
any of its properties or assets may be bound, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Issuer or any of
its properties or assets.
(c) Authorized Stock. 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 that number of shares of Issuer Common Stock equal
to the maximum number of shares of Issuer Common Stock at any time and from
time to time purchasable upon exercise of the Option, and all such shares, upon
issuance pursuant to the Option, will be duly and validly issued, fully paid
and nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever and not subject to
any preemptive rights.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that 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, and this Agreement has been duly
executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer 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 transactions 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
6
7
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 in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one
of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged
for stock or other securities of Issuer or any other person or cash or any
other property or the outstanding shares of Issuer Common Stock immediately
prior to such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company, or (iii) to
sell or otherwise transfer more than 50% of the consolidated assets or deposits
of Issuer and its Subsidiaries to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case (but at the election of Holder in the
case of clause (iii)), the agreement governing such transaction shall make
proper provisions so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option (the "Substitute Option"), at the election of
Holder, of any of (x) the Acquiring Corporation (as hereinafter defined), (y)
any person that controls the Acquiring Corporation or (z) in the case of a
merger described in clause (ii), Issuer (such person being referred to as
"Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. Substitute Option Issuer also shall enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided
by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of Substitute Common Stock (the "Substitute Option
Price") shall then be equal to the Purchase Price multiplied by a fraction, the
numerator of which shall be the number of shares of Issuer Common Stock for
which the Option was theretofore exercisable and the denominator of which shall
be the number of shares of Substitute Common Stock for which the Substitute
Option is exercisable.
7
8
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing
or surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, or (iii) the transferee of all or
substantially all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of
capital stock (or similar equity interest) with the greatest voting
power in respect of the election of directors (or persons similarly
responsible for the direction of the business and affairs) of the
Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the
price per share of Issuer Common Stock at which a Tender Offer or an
Exchange Offer therefor has been made, (x) the price per share of
Issuer Common Stock to be paid by any third party pursuant to an
agreement with Issuer, (y) the highest closing price for shares of
Issuer Common Stock within the six-month period immediately preceding
the consolidation, merger or sale in question and (z) in the event of
a sale of more than 50% of the consolidated assets of Issuer and its
subsidiaries, an amount equal to (i) 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 Holder, divided by (ii) the number of shares
of Issuer Common Stock outstanding at such time. In the event that a
Tender Offer or an Exchange Offer is made for Issuer Common Stock or
an agreement is entered into for a merger or consolidation involving
consideration other than cash, the value of the securities or other
property issuable or deliverable in exchange for Issuer Common Stock
shall be determined by a nationally-recognized investment banking firm
selected by Holder.
(4) "Average Price" shall mean the average closing price
of a share of Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger or sale;
provided that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common
stock issued by Issuer, the person merging into Issuer or by any
company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares of Substitute
Common Stock but for the limitation in the first sentence of this Section 7(f),
8
9
Substitute Option Issuer shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in the first sentence of this Section 7(f) over (ii) the value of
the Substitute Option after giving effect to the limitation in the first
sentence of this Section 7(f). This difference in value shall be determined by
a nationally-recognized investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in
Section 7(b) unless the Acquiring Corporation and any person that controls the
Acquiring Corporation assume in writing all the obligations of Issuer hereunder
and take all other actions that may be necessary so that the provisions of this
Section 7 are given full force and effect (including, without limitation, any
action that may be necessary so that the holders of the other shares of common
stock issued by Substitute Option Issuer are not entitled to exercise any
rights by reason of the issuance or exercise of the Substitute Option and the
shares of Substitute Common Stock are otherwise in no way distinguishable from
or have lesser economic value (other than any diminution in value resulting
from the fact that the shares of Substitute Common Stock are restricted
securities, as defined in Rule 144 under the Securities Act or any successor
provision) than other shares of common stock issued by Substitute Option
Issuer).
8. Repurchase at the Option of Holder.
(a) At the request of Holder delivered after the first occurrence
of a Repurchase Event (as defined in Section 8(d)) and prior to an Exercise
Termination Event, Issuer shall repurchase from Holder (i) the Option and (ii)
all shares of Issuer Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which
Holder exercises its rights under this Section 8 is referred to as the "Request
Date." Such repurchase shall be at an aggregate price (the "Section 8
Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any
shares of Issuer Common Stock acquired pursuant to the Option with
respect to which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7),
multiplied by the number of shares of Issuer Common Stock with respect
to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or,
in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder
for each share of Issuer Common Stock with respect to which the Option
has been exercised and with respect to which Holder then has
beneficial ownership, multiplied by the number of such shares.
9
10
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within ten 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
shall warrant that it has sole record and beneficial ownership of such shares
and that the same are then free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or approval of the Federal Reserve Board or
any other Governmental Entity 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 to promptly file the required notice or application
for approval and expeditiously process the same (and each party shall cooperate
with the other in the filing of any such notice or application and the
obtaining of any such approval), in which case the ten-day period referred to
in the first sentence of this Section 8(b) 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. If the Federal Reserve Board or any other Governmental Entity
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 the
Federal Reserve Board or any other Governmental Entity 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 the Federal Reserve Board
or other Governmental Entity, 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.
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 8(d)(i), (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on the American
Stock Exchange ("AMEX") (or if Issuer Common Stock is not quoted on the AMEX,
the highest bid price per share as quoted on the principal trading market or
securities exchange on which such shares are traded, as reported by a
recognized source chosen by Holder) during the 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
10
11
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 Holder, divided by the number of shares of Issuer Common Stock
outstanding at the time of such sale. If the consideration to be offered, paid
or received pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be determined in good
faith by an independent nationally-recognized investment banking firm selected
by Holder and reasonably acceptable to Issuer, which determination shall be
conclusive for all purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any
person (other than Grantee or any Subsidiary of Grantee) shall have acquired
beneficial ownership of (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), or the right to acquire beneficial ownership of, or
any "group" (as such term is defined in Section 13(d)(3) of the Exchange Act)
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 25% or more of the then outstanding shares of Issuer
Common Stock, or (ii) any of the transactions described in Section 7(b)(i),
Section 7(b)(ii) or Section 7(b)(iii) shall be consummated. The parties hereto
agree that Issuer's obligations to repurchase the Option or Option Shares under
this Section 8 shall not terminate upon the occurrence of an Exercise
Termination Event unless no Purchase Event shall have occurred prior to the
occurrence of an Exercise Termination Event.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the
conditions of Section 9(c), if requested by any Holder, as expeditiously as
possible prepare and file a registration statement under the Securities Act if
such registration is necessary in order to permit the sale or other disposition
of any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Holder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Holder in such
request, including without limitation a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision, and Issuer shall
use its best efforts to qualify such shares or other securities for sale under
any applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any time after
the exercise of the Option proposes to register any shares of Issuer Common
Stock under the Securities Act in connection with an underwritten public
offering of such Issuer Common Stock, Issuer will promptly give written notice
to 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 Holder), Issuer will cause all such shares
for which a Holder shall have requested participation in such registration to
be so registered and included in such underwritten public offering; provided,
however, that Issuer may elect to not cause any such shares to be so registered
(i) if the underwriters in good faith object for valid business reasons, or
(ii) in the case of a registration solely to implement an employee benefit plan
11
12
or a registration filed on Form S-4 under the Securities Act or any successor
form; provided, further, however, that such election pursuant to clause (i) may
only be made one time. If some but not all the shares of Issuer Common Stock
with respect to which Issuer shall have received requests for registration
pursuant to this Section 9(b) shall be excluded from such registration, Issuer
shall make appropriate allocation of shares to be registered among Holders
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 such Holder bears to the total number of
shares requested to be registered by all such Holders then desiring to have
Issuer Common Stock registered for sale.
(c) Conditions to Required Registration. Issuer shall use all
reasonable efforts to cause each registration statement referred to in Section
9(a) to become effective and to obtain all consents or waivers of other parties
which are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if Issuer
shall in good faith determine that any such registration would adversely affect
an offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan
pursuant to Article VII thereof and (B) a Purchase Event that occurs
prior to an Exercise Termination Event;
(ii) on more than one occasion during any calendar year
and on more than two occasions in total;
(iii) within 90 days after the effective date of a
registration referred to in Section 9(b) pursuant to which the Holder
or Holders concerned were afforded the opportunity to register such
shares under the Securities Act and such shares were registered as
requested; and
(iv) unless a request therefor is made to Issuer by the
Holder or Holders of at least 25% or more of the aggregate number of
Option Shares (including shares of Issuer Common Stock issuable upon
exercise of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be 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, however, that Issuer
shall not be required to consent to general jurisdiction or to 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.
12
13
(d) Expenses. Issuer will pay all expenses (including without
limitation registration fees, qualification fees, blue sky fees and expenses,
accounting expenses, legal expenses and printing expenses incurred by it) in
connection with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any registration under
Section 9(a) or (b), Issuer hereby indemnifies each Holder, 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, or
alleged untrue, statement of a material fact contained in any registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission, or alleged 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 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 Section 9(e)
of notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably
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
13
14
counsel (other than reasonable costs of investigation) shall be paid by the
indemnified party unless (i) the indemnifying party agrees to pay the same,
(ii) the indemnifying party fails to assume the defense of such action with
counsel reasonably satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be
entitled to assume the defense of such action notwithstanding its obligation to
bear fees and expenses of such counsel. No indemnifying party shall be liable
for any settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this Section 9(e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative
benefits received by Issuer, the selling Holders and the underwriters from the
offering of the securities and also the relative fault of Issuer, the selling
Holders and the underwriters in connection with the statement or omissions
which results in such expenses, losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The amount paid or payable by
a party as a result of the expenses, losses, claims, damages and liabilities
referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim; provided, however, that in no case shall the
selling Holders 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(g) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Any
obligation by any Holder to indemnify shall be several and not joint with other
Holders.
In connection with any registration pursuant to Section 9(a) or (b)
above, Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with all
reporting requirements and will do all such other things as may be necessary to
permit the expeditious sale at any time of any Option Shares by Holder in
accordance with and to the extent permitted by any rule or regulation
permitting nonregistered sales of securities promulgated by the Commission from
time to time, including, without limitation, Rule 144A. Issuer shall at its
expense provide the Holder with any information necessary in connection with
the completion and filing of any reports or forms required to be filed by it
under the Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
14
15
10. 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 any securities exchange or national
quotation system, 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 such securities exchange or national quotation system and will
use its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
11. Division of Option. Upon the occurrence of a Purchase Event,
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 the Issuer for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase
in the aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any other
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
12. Rights Agreement. Issuer shall not approve, adopt or amend,
or propose the approval, adoption or amendment of, any shareholder rights plan
unless such shareholder rights plan contains terms which provide, to the
reasonable satisfaction of Grantee, that (i) the Rights issued pursuant thereto
will not become exercisable by virtue of the fact that Grantee is the
beneficial owner of shares of Issuer Common Stock acquired or acquirable
pursuant to the grant or exercise of the Option and (ii) no restrictions or
limitations with respect to the exercise of any Rights acquired or acquirable
by Grantee will result or be imposed to the extent such Rights relate to the
shares of Issuer Common Stock described in clause (i) of this Section 12. This
covenant shall survive for so long as Grantee is the beneficial owner of shares
of Issuer Common Stock acquired or acquirable pursuant to the grant or exercise
of the Option.
13. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed
$35,000,000 and, if it otherwise would exceed such amount, the Grantee, at its
sole election, shall either (i) reduce the number of shares of Issuer Common
Stock subject to this Option, (ii) deliver to the Issuer for cancellation
Option Shares previously purchased by Grantee, (iii) pay cash to the Issuer or
(iv) any combination thereof, so that Grantee's actually realized Total Profit
shall not
15
16
exceed $35,000,000 after taking into account the foregoing actions. 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 8 hereof,
(ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of the
Option Shares pursuant to Section 8 hereof, 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 equivalent amount with respect to the
Substitute Option.
(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 hereinafter defined) of more
than $35,000,000, provided that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date. As used
herein, the term "Notional Total Profit" with respect to any number of shares
as to which Grantee may propose to exercise this Option shall be the Total
Profit determined as of the date of such proposed exercise assuming that this
Option were exercised on such date for such number of shares and assuming 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).
14. Miscellaneous.
(a) Expenses. Except as otherwise provided in Sections 4 and 9,
each of the parties hereto shall bear and pay all costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement; No Third Party Beneficiaries; Severability.
This Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter
hereof, and (ii) is not intended to confer upon any person other than the
parties hereto (other than the indemnified parties under Section 9(e) and any
transferee of the Option Shares or any permitted transferee of this Agreement
pursuant to Section 14(h)) any rights or remedies hereunder. If any term,
provision, covenant or
16
17
restriction of this Agreement is held by a court of competent jurisdiction or a
federal or state regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Option does not permit Holder to acquire, or 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 Maine without regard to
any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation) or sent by overnight mail service or
mailed by registered or certified mail (return receipt requested) postage
prepaid, to the parties at the following address (or at such other address for
a party as shall be specified by like notice):
If to Grantee:
Peoples Heritage Financial Group, Inc.
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000-0000
Attn: Xxxxxxx X. Xxxx
Chairman, President and Chief Executive Officer
Fax: 000-000-0000
With a required copy to:
Elias, Matz, Xxxxxxx & Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Fax: 000-000-0000
17
18
If to Issuer:
CFX Corporation
000 Xxxx Xxxxxx
Xxxxx, Xxx Xxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
President and Chief Executive Officer
Fax: 000-000-0000
With a required copy to:
Xxxxxx & Xxxxxx
000 00xx Xxxxxx
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxx Xxxxxx, Esq.
Fax: 000-000-0000
(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 may be assigned by
either of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other party, except that Holder may assign its
rights and obligations hereunder in whole or in part in the event of the
occurrence of a Purchase Event prior to an Exercise Termination Event,
provided, however, that until the date 15 days following the date on which the
Federal Reserve Board approves an application by Grantee to acquire the shares
of Issuer Common Stock subject to the 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 Board. 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
18
19
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.
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: CFX CORPORATION
/s/ E.L. Xxxxxxx By: /s/ Xxxxx X. Xxxxxx
-------------------------------------- ------------------------------
Name: E.L. Xxxxxxx Name: Xxxxx X. Xxxxxx
Title: Assistant Secretary Title: President and Chief
Executive Officer
PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:
/s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxx
-------------------------------------- --------------------------------------
Name: Xxxxx X. Xxxxxxx Name: Xxxxxxx X. Xxxx
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive Officer
and Chief Financial Officer
19
