Exhibit 10.1
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 as of December 16, 1998, by and
between Vermont Financial Services Corp., a Delaware corporation ("Issuer"), and
Xxxxxxxxxx Corporation, a Vermont corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan
of Merger dated as of the date hereof (as amended from time to time, the "Merger
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Agreement"), which agreement has been executed by the parties hereto immediately
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prior to the execution of this Stock Option Agreement (this "Agreement"); and
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WHEREAS, as a condition to Grantee's entering into the Merger
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 Merger Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and intending to be legally bound hereby, 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
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to 2,557,073 fully-paid and nonassessable shares of Issuer's Common Stock, par
value $1.00 per share ("Common Stock"), at a price of $ 22.00 per share (the
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"Option Price"); provided, however, that in no event shall the number of shares
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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 Merger Agreement.
2. (a) 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 Holder shall have sent
to Issuer written notice of such exercise (as provided in subsection (e) of this
Section 2) within 90 days following such Subsequent Triggering Event. Each of
the following shall be an "Exercise Termination Event": (i) the Effective Time
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(as defined in the Merger Agreement) of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event, except a
termination by Grantee pursuant to Section 9.1(b) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
nonvolitional); or (iii) the passage of 12 months after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Section 9.1(b) of
the Merger Agreement (unless the breach by Issuer giving rise to such right of
termination is nonvolitional). The term "Holder" shall mean the holder or
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holders of the Option from time to time, and which is initially Grantee.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each, an "Issuer
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Subsidiary"), without having received Grantee's prior written consent, shall
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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
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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
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recommended that the stockholders of Issuer approve or accept any Acquisition
Transaction. For purposes of this Agreement, "Acquisition Transaction" shall
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mean (w) a merger, consolidation or 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,
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lease or other acquisition or assumption of all or a substantial portion of the
consolidated assets or consolidated deposits of Issuer or 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 (A) the transactions
contemplated by the Merger Agreement or the entering into of the Merger
Agreement constitute an Acquisition Transaction or (B) any merger,
consolidation, purchase or similar transaction involving only the Issuer and one
or more of its Subsidiaries or involving only any two or more of such
Subsidiaries be deemed to be an Acquisition Transaction, provided such
transaction is not entered into in violation of the terms of the Merger
Agreement;
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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, 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 Merger
Agreement in anticipation of engaging in an Acquisition Transaction with any
person other than Grantee or Grantee Subsidiary, or the Board of Directors of
Issuer shall have publicly announced its intention not to recommend that the
stockholders of Issuer approve the transactions contemplated by the Merger
Agreement because of or in connection with an actual or proposed Acquisition
Transaction involving any person other than Grantee or Grantee Subsidiary;
(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 by
public announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction; or
(v) After an overture is made by any person other than
Grantee or any Grantee Subsidiary to Issuer or its stockholders to engage in an
Acquisition Transaction, Issuer shall have breached any covenant or obligation
contained in the Merger Agreement and such breach (x) would entitle Grantee to
terminate the Merger Agreement and (y) shall not have been cured prior to the
Notice Date (as defined below).
(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 Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), 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.
(c) The term "Subsequent Triggering Event" shall mean either
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of the following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial
ownership of 20% or more of the then outstanding Common Stock; or
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(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (y) thereof shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event of which Issuer
has notice (together, a "Triggering Event"), it being understood and agreed that
the giving of such notice by Issuer shall not be a condition to the right Holder
to exercise the Option.
(e) In the event 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 of
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Common Stock 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
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that if prior notification to or approval of the Federal Reserve Board or any
other governmental authority or regulatory agency is required in connection with
such purchase, Holder and Issuer shall promptly file the required notice, form
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.
(f) At the closing referred to in subsection (e) of this Section 2,
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
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failure or refusal of Issuer to designate such a bank account shall not preclude
Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of the purchase
price as provided in subsection (f) of this Section 2, Issuer shall deliver to
Holder a certificate or certificates representing the number of shares of Common
Stock purchase by Holder and, if the Option shall have been exercised in part
only, a new Option evidencing the rights of Holder thereof to purchase the
balance of the shares of Common Stock purchasable hereunder, and Holder shall
deliver to Issuer a copy of this Agreement. By receipt of any shares of Common
Stock issuable hereunder Holder will agree, and does hereby agree, not to offer
to sell or otherwise dispose of such shares in violation of the Securities Act
of 1933, as amended (the "1933 Act"), other applicable law or the provisions of
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this Agreement.
(h) In addition to any other legend that may be required by
applicable law, certificates for shares of Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
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"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 1933 Act, in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if Holder shall have delivered to Issuer a
copy of a letter from the staff of the SEC, or an opinion of counsel, in form
and substance reasonably satisfactory to Issuer and its counsel, to the effect
that such legend is not required for purposes of the 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.
(i) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price under subsection (f) of this Section
2, 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 Holder. Issuer shall pay
all expenses, regulatory fees 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 2 in
the name of 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 or treasury 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 shall 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. (S)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 Board or to any state or federal 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 Board of
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such state regulatory authority as they may require) in order to permit Holder
to exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) that it shall promptly take all action provided
herein to protect the rights of Holder against dilution and otherwise hereunder.
4. This Agreement and the Option granted hereby are exchangeable,
without expense, at the option of Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
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 "Options" as used herein include any Stock Option
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 the Issuer, whether or not
the Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
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 Merger Agreement, or the like, the
type and number of securities purchasable upon exercise hereof and the Option
Price shall be appropriately 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, and the inclusion and
validity of such provision shall be a condition to, the validity and
consummation of any such transaction, such proper adjustments 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 90 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
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 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
any shares of Common Stock issued upon total or partial exercise of this Option
("Option Shares") in accordance with any plan of disposition
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requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement promptly to become effective and then to remain effective
for a period 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 with inclusion of 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,
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however, that after any such required reduction the number of Option Shares to
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be included in such offering for the account of Holder shall constitute at 25%
of the total number of shares to be sold by Holder and Issuer in the aggregate;
and provided further, however, that if such reductions occurs, then the Issuer
shall file a registration statement for the balance as promptly as practical 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 by obligated to effect more
than two registrations pursuant to this Section 6 by reason of the fact that
there shall be more than on Grantee as a result of any assignment or division of
this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase
Event (as defined below), (i) following a request of Holder, delivered within 90
days of the occurrence of the Subsequent Triggering Event giving rise to such
Repurchase Event (or such later period as provided in Section 10), Issuer (or
any successor there to) shall repurchase the Option from Holder at a price (the
"Option Repurchase Price") equal to the amount by which (A) the Market/Offer
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Price (as defined below) exceeds (B) the Option Price, multiplied by the number
of shares for which this Option many then be exercised and (ii) at the request
of the owner of Option Shares from time to time (the "Owner"), delivered within
90 days of the occurrence of such Subsequent Triggering Event (or such later
period as provided in Section 10), Issuer shall repurchase such number of Option
Shares from the Owner as the owner shall designate at a price (the "Option Share
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Repurchase Price") equal to the Market/Offer Price multiplied by the number of
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Option Shares so designated. The term "Market/Offer Price" shall mean the
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highest of (i) the price per share of Common Stock at which a tender offer or
exchange offer therefor has been made, (ii) the price per share of Common Stock
to be paid by any third party
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pursuant to an agreement with Issuer, (iii) the highest closing price for shares
of Common Stock within the six-month period immediately preceding the date
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 (iv)
in the event of a sale of all or a substantial portion of Issuer's assets, 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 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 Holder
or Owner, as the case may be, and reasonably acceptable to the Issuer.
(b) Holder and 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, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that 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. Prior to the later to occur of (x) 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 (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver
or cause to be delivered to 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 and regulations from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to 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 or regulation from delivering, to Holder and/or the Owner,
as appropriate, the Option Repurchase Price and the Option Share Repurchase
Price, respectively, in full (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), 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 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 Holder, a new Stock Option
Agreement evidencing the right of Holder to purchase that number of shares of
Common Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Agreement was
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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 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, "Repurchase Event" shall be
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deemed to have occurred upon either (i) the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase, lease or
other acquisition of all or a substantial portion of the assets of Issuer, other
than any such transaction which would not constitute an Acquisition Transaction
pursuant to the provisions to Section 2(b)(i), or (ii) the acquisition by any
person of beneficial ownership of 50% or more of the outstanding shares of
Common Stock, provided that neither such event shall constitute a Repurchase
Event unless a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event. The parties hereto agree that Issuer's obligations
to repurchase the Option or Option Shares under this Section 7 shall not
terminate upon the occurrence of an Exercise Termination Event unless no
Subsequent Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination Event and subject to the provisions of Section 7(a). Prior
to the occurrence of any Repurchase Event, the Issuer shall notify in writing
the Holder and each Owner of such Repurchase Event.
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 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 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 one of its Subsidiaries, then, and in each such cases the
agreement governing such transactions shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of holder, of either (x) the
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Acquiring Corporation (as hereinafter defined or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meaning indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing
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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, and (iii) the transferee of all or substantially all of Issuer's assets.
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(ii) "Substitute Common Stock" shall mean the common stock
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issued by the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the Market/Offer Price, as
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defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
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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 Holder may elect,
(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 to those
of the Option and in no event less advantageous to Holder of the Option. 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 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.
(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
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Issuer") shall make a cash payment to Holder equal to the excess of (i) the
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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 Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
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(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"), the Substitute Option Issuer shall repurchase the
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Substitute Option from the Substitute Option Holder at a price (the "Substitute
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Option Repurchase Price") equal to the amount by which (i) the Highest Closing
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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
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"Substitute Shares"), the Substitute Option Issuer shall repurchase the
-----------------
Substitute Shares 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, as 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 for 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 related
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 and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation from repurchasing the Substitute Option
and/or the Substitute Shares in part or in full, the Substitute Option Issuer
following a request to 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, with five business days after the date on
which the Substitute Option Issuer is no
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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 or regulation 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 full (and the Substitute Option Issuer shall
use its reasonable 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 period for exercise of certain rights Sections 2, 6, 7 and
13 shall be extended: (i) to the extent necessary to obtain all legal and
regulatory approvals for the exercise of such rights (for so long as the Holder,
Owner, Substitute Option Holder or Substitute Share Owner, as the case may be,
is using its reasonable best efforts to obtain such regulatory approvals) 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 any period in which Grantee is precluded from
exercising such rights due to an injunction or other legal restriction, plus in
each case such additional period as is reasonably necessary for the exercise of
such rights promptly following the obtaining of such approvals or the expiration
of such periods.
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 and other 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,
charges, encumbrance and security interests of any kind or nature whatsoever and
not subject to any preemptive rights.
(c) 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 charter 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.
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 under this Agreement or the
Option created hereunder within 90 days following such Subsequent Triggering
Event (or such later period as provided in Section 10); provided, however, that
until the date 15 days following the date on which the Federal Reserve Board
approves an application by Grantee under the BHCA to acquire the shares of
Common Stock subject to the Option, Grantee may not assign its rights under the
Option except in (i) a widely dispersed
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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.
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
contemplate by this Agreement, including without limitation making application
to list or quote the shares of Common Stock issuable hereunder on any stock
exchange or quotation system on which the Common Stock is then listed or quoted
and applying to the Federal Reserve Board under the BHCA for approval to acquire
the shares issuable hereunder.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto, that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof or was otherwise breached, and
that the parties will be entitled to equitable relief hereunder, including,
without limitation, an injunction or injunctions to prevent and enjoin breaches
of the provisions of this Agreement and to enforce specifically the terms and
provisions hereof, in addition to any other remedy at law or in equity to which
they may be entitled at law or in equity. Any requirements for the securing or
posting of any bond with respect to any such remedy are hereby waived.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or other governmental authority 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 governmental authority determines
that Holder is not permitted to acquire, or Issuer or Substitute Option Issuer,
as the case may be, is not permitted to repurchase pursuant to Section 7 or
Section 9, as the case may be, the full number of shares of Common Stock
provided in Section 1(a) (as adjusted pursuant to Section 1(b) or 5), it is the
express intention of Issuer (which shall be binding on the Substitute Option
Issuer) to allow Holder to acquire or to require Issuer or Substitute Option
Issuer, as the case my be, to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
overnight courier, by cable, telegram, telecopy or telex, or by registered or
certified mail (postage prepaid, return receipt requested) at the respective
addresses of the parties set forth in the Merger Agreement.
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18. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. 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.
21. Except as otherwise expressly provided herein or in the Merger
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.
22. Capitalized terms used in this Agreement and not defined herein shall
have the respective meanings assigned thereto in the Merger Agreement.
[Remainder of page left blank intentionally.]
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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.
XXXXXXXXXX CORPORATION
By: /s/ Xxxx X. Xxxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Executive Officer
VERMONT FINANCIAL SERVICES CORP.
By: /s/ Xxxx X. Xxxxxxxx, Xx.
--------------------------------
Name: Xxxx X. Xxxxxxxx, Xx.
Title: President
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